The adjusted R square statistic (Adj. R2 = .003) indicates that compensation actually accounts for only 0.3% of the variance in the performance of the SMEs in Kisumu Municipality, and that the rest 99.7% of the variance in the performance of the SMEs in Kisumu Municipality are accounted for by other factors including errors in the measurements, but not employee compensation. Since employee compensation is NOT a significant predictor of the performance of SMEs, it was not necessary to build prediction model of performance using the constant and B values. But a prediction model of PI = 59.12-1.31H; where PI is the predicted performance, H the status of compensation could still be built if it can be accurately measured. However, just like in the case of employee involvement, the predictions based on this model are largely unrealistic since the whole regression model is insignificant.