The current problem facing Performance Contracting (PC) in Kenyan public enterprises has been\r\nattributed to the failure of organizations to cascade the concept to individual employee level,\r\nleading to a discrepancy between the results of PC and the reality on the ground. The purpose of\r\nthis study was to examine the effect of performance target setting in performance contracting on\r\nKenyan Public Enterprises Employees Performance. The study used the descriptive survey design\r\nto collect the views and opinions of respondents working in KENGEN (Okaria) in Naivasha. The\r\ntarget population was 600 in which 235 respondents was the sample for the study. Presentation of\r\ndata used descriptive statistics such as frequencies and percentages and inferential statistics used\r\nwere using Pearson correlation coefficient and linear regression technique. Particularly, the\r\ncorrelation analysis was undertaken to test the hypotheses of the study. The findings established\r\nthat there was a strong positive correlation between performance target setting and employee\r\nperformance. The null hypothesis that there is no correlation between performance target setting\r\nand employee performance was rejected. The study concluded that performance contracting had a\r\nstrong positive effect on employee performance in public enterprises in Kenya and thus need to\r\nensure performance target setting is well organized and planned. From the findings the study\r\nrecommended that performance target setting in performance contracting be expanded to cover all\r\nareas of the organization and be cascaded to all employees of the organization and that evaluation\r\nbe linked to some incentive system so that performance can be sustained
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