1. School of Business and Economics, Daystar University, Nairobi – Kenya; jkyongo@daystar.ac.ke*             Correspondence: jkyongo@daystar.ac.ke

Keywords: social competence, organizational performance, Resource Based View, Knowledge Space Theory, Nairobi Securities Exchange

1. INTRODUCTION

Social competence is the experience, knowledge, and ability to cope with various interaction situations [1] whereas organizational performance is a collection of financial and non-financial indicators which provide information on the degree of achievement of objectives [2].  Social competence has been found to positively contribute to organizational performance [3]. Therefore, organizations that endeavor to perform should consider investing in the social competence of their managers. According to Knowledge Space Theory, competencies predict performance outcomes and provide an explanation for discrepancies in performance [4]. Thus, determining a set of problems and identifying a set of corresponding competencies can significantly assist organizations to enhance their performance. The Resource-Based View justifies variations in performance between companies because of knowledge asymmetries [5]. Empirical research has shown positive and significant effect of social competence on organizational performance [6-8].  However, most of the cited studies targeted Education, Health and ICT sub-sectors in Iran, Taiwan, Jordan and Malaysia. Further, some studies focused on one aspect of organizational performance such as financial performance [9-11].  The extant study addressed the said gaps by examining the effect of social competence on both financial and non-financial performance of companies in different industries in Kenya as listed on the Nairobi Securities Exchange.

2. LITERATURE REVIEW

The way managers relate with others in their workplaces is determined by their level of relational or social competence.  Social competencies enable managers to increase their productivity in establishing and maintaining healthy business relationships within organizations and internal and external stakeholders [12]. Individuals who are socially competent have been found to be good in communication, team playing, networking, lobbying, maintaining meaningful relationships with internal and external business stakeholders and understanding their expectations [13]. Organizations measure their performance differently. Some measures of organizational performance include return on investment (ROI), market share and market share growth [14]^, sales, export proportions and growth rates in domestic and export sales growth [15]. Other studies have measured organizational performance through profitability, gross profit, revenue growth, stock price, sales growth, export growth, liquidity and operational efficiency and the Balanced Scorecard [16-18]. The Balanced Scorecard adopted by the current study examined firm performance from the perspective of the customer, learning and growth, internal business processes, environment and finances [19-21]. The selected tool is appropriate for this study because it is a multidimensional approach, which does not leave any key functional area in the organization unturned [22].  The Nairobi Securities Exchange, formerly known as Nairobi Stock Exchange until July 2011, was formally recognized in 1954 by the London Stock Exchange as an overseas stock exchange [23].^. It has grown to become a major financial institution as it has the fourth largest trading volume across the African continent and plays an important role in the growth of Kenya’s economy [24]. There were 61 companies listed on the Nairobi Securities Exchange as of 2021 [25].  Since these companies represent key sectors of the Kenyan economy, which include Agriculture, Commercial, and Services Sector, Financial, and Investment sector and Development industry and Allied sector, Nairobi Securities Exchange was the target for the study. The choice of listed companies for the study is further justified by the requirements for listing which include among others, that for a company to be listed, it must be a company limited by shares and registered under the Companies Act (Cap. 486) as a public limited company and to publish audited financial statements regularly in compliance with international financial reporting standards at the end of each accounting period [26]. For the purpose of compliance, the listed companies issue their audited financial statements, which this study used to measure their financial performance (2021-2023).  The group of companies listed on the NSE was considered appropriate for the study because various stakeholders expect them to perform and for them to perform satisfactorily, they would need resources and in particular human resources. The shareholders hold these companies accountable and expect them to facilitate generation of fair profits. The Government of Kenya aims to achieve and sustain an annual growth rate of 10% for it to realize the Kenya Vision 2030 [27] and therefore expects the NSE to play its role as a robust securities market. The NSE, on its part, expects the listed companies to perform and meet the expectations of the stakeholders by enhancing their efficiency and competitiveness. To address the expectations of stakeholders, managers of the listed companies should be competent enough to achieve organizational goals. Social competence influences organizational performance. In the study by [28] on emotional intelligence and faculties’ academic performance, it was found that social competence and individual competence have a positive effect on academic performance of faculty members. Kim et al, (2008) found a positive correlation between social competence and organizational performance. Social skills are the best single predictor of job performance ratings [29]. Similarly, [30] reported skills as the single strongest predictor of performance rating dimensions of task performance, job dedication, and social facilitation, as well as for an overall rating of return. Results of an investigation conducted by [31] indicated that high performing employees were more skilled at communicating empathy, adapting their communication and managing interactions with others than lower-performing employees. Similar findings of another research showed that possession of social competence led to a good prediction of job performance [32].  Further results of research indicated that among all individual factors, social skill had the strongest contribution in explaining the extension workers’ performance [33].  For the purpose of this study, the following hypothesis was formulated:  Social competencies have a positive and significant effect on the performance of companies listed on the Nairobi Securities Exchange.

3. RESEARCH METHODOLOGY

This study adopted a positivist philosophical tradition and a cross-sectional descriptive survey of all the 61 companies listed on the Nairobi Securities Exchange as of 2023. Primary data was collected from human resource managers or equivalent persons. Secondary data on financial performance (ROA) of Nairobi Securities Exchange listed companies was extracted from the audited accounts for a three-year period, 2021-2023. Instrument validation was achieved through validity and reliability tests.  Professionals in human resource management censured content validity. The researcher confirmed face validity by checking the coverage of all the areas of investigation in the instrument and by adopting already tested instruments used by similar studies. This was done to compliment the validity tests done by previous studies from which the research instrument was adapted. A reliability test of the collected data was performed using Cronbach Alpha and the coefficient for social competence and organizational performance was 86.8 above the minimum level (0.70) for acceptable reliability as suggested by Nunnally and Bernstein [34]. This means that the data collected was reliable for analysis.

4. RESULTS AND DISCUSSION

The study used both descriptive and inferential statistics to analyze data from the questionnaires and from the published audited accounts. Simple linear regression analysis was used to establish the nature and magnitude of the relationship between the independent variable and the dependent variable and to test the predicted relationship. The value of R squared shows the amount of variation in the dependent variable caused by the independent variable.  The beta value shows the amount of change in the dependent variable attributable to the amount of change in the predictor variable. The F-statistics measure the goodness of fit of the model. The statistical significance of the hypothesized relationship was interpreted based on R², F, t, β and p values. The regression model used was: Y= β₀+ β ₁X₁+ϵ, where Y=Firm performance; β₀₌ Intercept; β₁₌ Coefficient; X₁ = Social Competence and ϵ=Error term.  The target population of the study was 61 companies listed on the Nairobi Securities Exchange as at 31 December, 2021. These companies form the unit of analysis for the study as each company has a unique set of social competencies.  Out of the 61 questionnaires issued to Human Resource Managers or equivalent officers, a total of 34 were filled and returned in a form usable for analysis, constituting a response rate of 55.7 %. The study response rate of 55.7 % was considered adequate for purposes of data analysis compared to a previous study done in the same area by Sagwa (2014) who had 60 %. The 34 companies that were surveyed represent the major sectors of Kenya’s economy. Frequencies and percentages were used to examine the distribution of companies listed on the NSE. Table 1 shows how the companies that responded to the study questionnaire are distributed per sector.

Table 01: Distribution per Sector

The findings in Table 1 indicate that out of the 34 companies that participated in the study, 32.3 % were in the banking sector; 17.7 % in the manufacturing and allied; 8.8 % in the construction and allied; 11.8 % in commercial and services; 5.9 % in Agriculture, insurance and energy and petroleum; 2.9 % in growth enterprise market segment and investment. The majority of the companies that responded to the questionnaire were in the banking sector (32.3%) and manufacturing and allied (17.7%).  Sagwa (2014) had similar findings: 22.2 % for banking sector and 25 % for manufacturing and allied. Thus, most of the listed companies on the NSE (61.76%), which responded, are in the banking sector, manufacturing and allied and commercial and services sectors. These companies play a major role in the economic development of Kenya. The study sought to determine the effect of social competencies on the performance of companies listed on the Nairobi Securities Exchange. This was done by testing the hypothesis that social competencies have a significant effect on firm performance by performing simple linear regression analysis. Table 2 presents the results of the analysis.

Table 02: Simple linear regression results for the effect of social competence on the performance of companies listed on the Nairobi Securities Exchange

Table 03: Coefficients

From the results in Table 3, R=0.768, meaning that there was a strong positive correlation between the independent variable and the dependent variable. The R-squared is 0.569, indicating that 56.9 % of the variation in company performance is explained by variation in social competencies and 43.1 % is explained by other factors that are not part of the study. The ANOVA results indicate that the model is statistically significant (F= 45.879, p<0.05). The standardized coefficients show that the effect of social competencies on company performance was positive and significant (β=0.768, t=6.773, p<0.05). The beta value implies that for one unit increase in social competencies, firm performance increased by 0.768. The findings therefore confirm the hypothesis that social competence has a significant effect on the performance of companies listed on the NSE. The results of the analysis suggest that companies listed on the NSE should consider developing social competencies to enhance their performance. The study findings agree with the result of a study by Kim, Yune, Choi, and Gong (2008) who found that social   competence was positively correlated with company. Further, the findings of the extant study are consistent with those of Nooraie and Arsi (2012) study on emotional intelligence and faculties’ academic performance, which established that social competence had a positive effect on academic performance of faculty members.

5. CONCLUSION

The study investigated the effect of social competencies on the performance of companies listed on the Nairobi Securities Exchange. The study was conducted through a cross-sectional survey. The study employed both descriptive and inferential statistics to analyze the data. Simple linear regression analysis was used to determine the effect of social competencies on firm performance. The study tested and confirmed the hypothesis that social competence has a significant effect on the performance of companies listed on the Nairobi Securities Exchange. This implies that Nairobi Securities Exchange listed companies that invest in the development of social competencies of their managers expect an improvement in their performance.

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