Restructuring is the act of organizing „differently‟ with a sole aim of strengthening the position of an institution in terms of its mandate and performance. It is a stage of repositioning, recasting the organizational structure. Studies conducted on the effect of demerger strategy on organizational performances have had conflicting results. The specific objective of this study was to investigate the effect of demerger strategy on organizational performance as well as establishing the state of facts concerning demerger as a restructuring strategy in the Kenyan Government Institutions. This study is premised on the Weick‟s Model of Organizing. The study utilised a descriptive research design. The targeted population was the employees of State Department for Trade and Enterprise Development. The sample was established by use of stratified random sampling and a sample of 146 respondents was generated. A questionnaire was used for data collection. Analyzed data was evaluated using descriptive statistics. Linear regression model was used to estimate the effect of independent variable on the dependent variable. Results of the study indicated that the response rate was 76.71% which was sufficient for inferential statistical analysis. A coefficient of determination generated after regression analysis was 85.4% of variance in the organizational performance of State Department of Trade and Enterprise Development. Results from inferential analysis showed the p-value and regression coefficient generated after running the regression model was (β= 0.223, p = 0.017). The study indicates that demerger has not only a significant but also a positive effect on State Department for Trade and Enterprise Development. These results therefore show that government institutions should consider demerger as a strategy for improving organizational performance in Ministries, Agencies and Departments in the public service.
Keywords: Restructuring, Demerger, Carve Out, Organizational Performance, Split-up, Split-up