The existence of a business organization is to achieve goals and objectives. The goals and objectives business organization set to achieve determines how the managers allocate tasks to employees. The allocated jobs are usually grouped into department. Nelson&Quick , 2011 opine that departments in organizations can be categorized into various units such as manufacturing, sales, marketing, advertising and so on. They added that departments are connected to shape the organizational structure.
Quangyan&Yezhuang, 2013 argued that structure of an organization gives it the shape to carry out its purpose in the business environment. An organization is a social unit, which is made up of two or more people that functions on a relatively continuous basis, in order to achieve a common goal or sets of goals. When an organization is set up, it has to be properly managed by a person called the manager in order to achieve the set goals. The manager must involve other people, as they make decisions, allocate resources, and direct the activities of others to achieve organizational objectives. In trying to do all these, organizations must establish an organizational structure. Organizations have different structures and these structures have a bearing on employees performance. Organizational structure is defined as the formal system of authority relationships and tasks that control and coordinate employee actions and behaviour to achieve goals in organizations Jones,2013.
Organizational structure describes the allocation of authority and responsibility, and how rules and regulation are executed by workers in firms Nahm, 2003. Organizational structure is a company’s skeleton. It defines the roles and departments that make up a company’s functioning and shows how everything fits together into a whole. When everyone in an organization understands their company’s structure, they are better able to work together, perform their roles and feel secure in the scope and limits of their jobs.
Organizational structure describes the formal arrangement of jobs and tasks in organizations Robbins;Coulter,2007 The success of any organization is directly affected by the performance of the employees within the organization, whether or not those employees are dealing directly with customers. Organizations that clearly understand the impact of their employees’ performance are better able to manage employee output and productivity. Properly managing employee performance helps any business to increase profits and consistently meet sales goals. It is important for organizations to motivate employees performance for high productivity and commitment to the task given.
Therefore, this study will examine critically the effects of organizational structure on employees performance
1.2 STATEMENT OF RESEARCH PROBLEM
Martinelli,2001 argued that the type of organizational structure adopted by a firm will depend on the nature of a particular organization in question. In the past decade the issue of organizational structure and employee performance have attracted the attention of scholars in organizational behaviour and have ignited a lot of discussions and arguments. Organizations have goals and objectives to achieve and this is only realizable through the coordinated efforts of employees. The structure of an organization which is the framework within which these goals and objectives are carried out is very fundamental to the realization of these goals. In the study of organization, it is recognized that organizations are structured in various ways. This portrays the complexity of it and workers too with their own goals and objectives amongst which is believed employee performance is paramount. Thus, the choice and application of the most suitable structure that would bring about the highest employee performance is a source of concern in this study.
However the rate of performance by forte oil compared to other oil companies is a source of worry and required a well structured organization to improve the performance of the employees which will then increase the performance of the organization
This being said, the study will attempt to answer the following questions
1.3 OBJECTIVES OF THE STUDY
The major objective of this study is to find out the effects of organizational structure on employees performance in an organization.
The specific objectives are
1. To assess the extent to which job specialization determine employee productivity
2. To ascertain if departmentalization can lead to employee effectiveness
3. To determine whether there is any relationship between chain of command and employee commitment.
1.4 RESEARCH QUESTIONS
To achieve the objective of the study the following questions are addressed:
1. To what extent does job specialization determine employee productivity
2. To what level can departmentalization lead to employee effectiveness
3. Is there a significant relationship between chain of command and employee commitment.
1.5 RESEARCH HYPOTHESES
A hypothesis is a tentative proposition proffered by a researcher at the commencement of the research work which represents his beliefs or assumption about the relationship that exist within the research variables (Ojo, 2003).
The following hypotheses have been formulated for the purposes of this research. The hypotheses will identify the independent variable and the dependent variable. A hypothesis is a statement about the relationship between them. The null hypotheses (H0) states that the two variables are independent of one another and the alternative hypothesis (H1) states that they are associated with one another.
H0: Job specialization has no effect on employee productivity
H0: The presence of departmentalization cannot lead to employee effectiveness
H0: That there is no relationship between chain of command and employee commitment
1.6 SIGNIFICANCE OF STUDY
This study will be significant to the organization in that it would enable them critically look into the issues they might have taken for granted (e.g. the reason behind high employee turnover). It would further enlighten the organization and employees on ways in which the organization’s structure can be improved upon to achieve the desired success
1.7 SCOPE OF STUDY
The study will be carried out at The Forte Oil Plc Lagos state. This study looks into the way and manner to which an organization is structured and how its has an effect on employees performance.
It would have been better for predictive purposes to make use of more than one organization but for the time and cost implications. Beside, the study may become unwieldy and unmanageable. Hence the decision to use one large organization to represent the industry.
1.8 RESEARCH METHODOLOGY
This refers to the way by which data relating to this study is to be collected and analyzed.
The information required for the study will be gathered through the use of primary source of data collection which is the questionnaire. The questionnaire will be divided into two parts. The first part will collect factual such as to collect respondents age, occupation qualification etc. the second part will seek respondents opinion the questions will be closed where the respondents answer is selected from the number of predetermined alternatives.
Closed questions are very convenient for collecting data and are usually easy to analyze since the range of potential answers is limited.
1.9 LIMITATION AND DELMITATION OF STUDY
Inadequate time to write this project is considered a limiting factor coupled with the possibility that the questionnaire may not be properly answered nor returned and good time.
The limitation of the study is that only one large organization will be used as case study. This notwithstanding it is believed that because it is one of the biggest organization in its industry, this will not adversely affect the validity of this study. So also are the limiting factors earlier expressed.
1.10 OPERATIONALIZATION OF THE STUDY
Organizational structure and its effect on workers performance can be operationalized using two (2) variables organizational structure is the independent construct; employees performance is the dependent construct. The variables for organizational structure are , job specialization, departmentalisation, chain of command, . The variables for employees performance are employee productivity, employee effectiveness, employee commitment. These constructs can further be expressed in mathematical representation; as
F = Functional analysis
X= Independent variables
Y= Dependent variables
Where: Employees performance is the dependent variable and;
Organizational structure is the independent variable
Where X- is our independent variable which is organizational structure
X = (X1, X2, X3, …………….Xn)
X1= Job specialization
X3= Chain of command
Where: Y- is our dependent variable which is employees performance
Y= (Y1, Y2, Y3, …………Yn)
Y1= Employee productivity
Y2= Employee effectiveness
Y3= Employee commitment
Y= Employees performance
X= Organizational structure
Employees performance= F (Organizational structure)
1.6 DEFINITION OF TERMS
Job specialization: define the amount of task are divided into separate parts in an organization.
Departmentalization : the grouping of related functions into manageable units to achieve the objectives of the enterprise in the most efficient and effective manner.
Chain of command: a clear definition of authority in the organization. This authority flows down the chain of command from the top level to the first or lowest level in the organization
Employee effectiveness : this is about the employee doing the right task, completing activities and achieving goals.
Employee productivity : a measure of the efficiency of an employee, in converting inputs into useful outputs.(Business Dictionary.com)
Employee commitment: A trait of employee sincere and steadfast fixity of purpose.
ORGANIZATIONAL STRUCTURE EMPLOYEE PERFORMANCE
JOB SPECIALIZATION EMPLOYEE PRODUCTIVITY
DEPARTMENTALIZATION EMPLOYEE EFFECTIVENESS
CHAIN OF COMMAND EMPLOYEE COMMITMENT
This chapter is basically to examine the works of other authors in this field under conceptual frame work, Theoretical framework, Empirical framework, what each variable entails and how it affects the performance of the organization and the philosophies that back up the study.
The Conceptual Framework involves the definition of concepts and terms in areas such as Organizational structure and Employee performance. The Theoretical Framework introduces the various theories that have been developed over various studies and these theories are responsible for guidance when this particular area of study is being discussed.
The Empirical Framework will review papers, articles, books, and journals of researchers that are tangible and are of utmost importance in the area of study.
2.1 Conceptual Framework
2.1.1CONCEPT OF ORGANIZATIONAL STRUCTURE
Martinelli,2001 An organization can be defined as a set of elements in interaction, structured level and decision making units. Snow ;Hrebiniak,1980, argued that organization is a group of two or more people working cooperatively towards a common objective or sets of objectives. In short, an organization is a group of people working together to achieve a purpose that cannot be achieved by an individual working alone. An organization is a tool used by people to coordinate their actions to obtain something they desire or value- that is, to achieve their goals. Organizations are social group constructed to achieve particular ends. They are characterized by the conscious division of labor, responsibility, and authority systems, and the need for control.
Hall,2000 An organization is a collectivity with a relatively identifiable boundary, a normative order(rules), ranks of authority(hierarchy), communications system, and membership coordinating systems(procedures), this collectivity exists, on a relatively continuous basis in an environment, and engages in activities that are usually related to a set of goals; the activities have outcomes for organizational members, the organization itself, and for society. Armstrong ; Stephen, 2008 organizations are open systems which transform inputs into outcomes and continually dependent on and influenced by their environment.
Wolf,2000 Structure is the architecture of business competence, leadership, talent, functional relationships and arrangements. Structure may be considered as the established pattern of relationships among the components or parts of the organization. However, the structure of a social system is not visible in the same ways as a biological or mechanical systems. Jo ;Hatch,2014 Structure refers to the relations between the components of an organized whole. The structure of an organization is the pattern of organizational roles, relationships and procedures that enable such coordinate actions by its members. The structure concept can be used for everything.
Greenberg,2011 refers to organizational structure as the formal configuration between the individuals and groups concerning the responsibilities, allocation of tasks, and authority in the organization. Stroth et al,2002 emphasized that organizational structure represents the relationship among different roles played by units within an organization. These diverse points of views of definition specify that the term organizational structure is not necessarily concentrated on any univocal characteristics, but rather more likely to have various dimensions. Ajagbe,2007 sees organizational structure as ‘how job tasks are formally divided, grouped and coordinated’. Formalization measures the extent to which an organization can use rules and procedures to prescribe behavior. Long et al,2012 suggested that organizations structure should be designed in a ways to ensure that departments and individuals that need to coordinate their efforts have lines of communication that are built into the structure. Csaszer,2008 agreed on the idea that organizational structure shapes performance in an organization.
Ajagbe,2007 asserts that organizational structure ‘is the formal system of task and reporting relationships that controls, coordinates and motivates employees so that they cooperate to achieve an organizations goals. He also affirms that organization can design its structure when its decides how it want its members to act, what attitudes it want to promote, and what its desires its members to attain, and support the development of cultural values and norms to get these desired behavior, attitudes and goals. Monavarian, Asgari & Ashna, 2007 “Organization structure is a set of methods dividing the task to determined duties and coordinates them. Rezayian,2005, ‘The organization creates the structure to coordinate the activities of work factors and control the members action’. The primary purpose of organization structure is to influence the behavior of individuals and groups to achieve effective performance.
2.1.2 Features of Organizational Structure
For companies to achieve long term success, they must create and maintain healthy environments in the workplace. Good organizations understand that its takes a collaborative effort to compete in their market segment and produce continuous profits. Recognizing and understanding the characteristics of good organizations can help detest problem in the organization if it is unprofitable and take corrective steps to operate a successful business.
A. Offer training opportunities
Maureen, 2001. Training is the process of teaching, informing, or educating people so that they become well qualified as possible to their work and so that they become well qualified to perform in positions of greater difficulty and responsibility. It can be deduced that staff training and development are deliberate efforts of an organization aimed at improving the knowledge, skill and behavioral modification required to perform a given task by the individual employee
Marks, Mathieus & Zaccaro,2001, define teamwork as ‘team members’ independent acts that converts inputs to outcomes through cognitive, verbal and behavioral activities directed towards organizing task work to achieve collective goals. It also include a group of people working together toward achieving a desired goal( Oroko,2013). Nowadays, managers in several organizations are making more team assignments to employees with aim to reinforce their knowledge and enhance their professional skills. (Hartenian,2003). Working with teams enables employees to cooperate, improve individual skills and provide practical feedback without making any conflict between any of the members.( Jong, Richard, Paul, Slone & Peter, 2007)
Bloisi et al,2007 state that it is a managers responsibility to establish and maintain internal communication channels upward, downward and horizontal directions that is communication between managers and employees as well as between employees on the same level. The main objectives for internal communication includes transmitting directions or ideas along the lines of command, providing confirmation, information and feedback upwards; informing staff on changes; encouraging and motivating employees.
2.1.3 TYPES OF ORGANIZATIONAL STRUCTURE
There are different basic structural forms—functional, divisional, and matrix—and some combinations or hybrids of them. Most organizations begin with a functional organization structure. As they become larger and more complex in terms of the products and services they offer or markets and clients they serve, they reorganize into some form of divisional structure, perhaps with a few centralized functional departments.
The importance of structure as a source of influence is so widely accepted that some experts define the concept as those features of the organization that serve to control or distinguish its parts. (Gibson, Ivancevich, DonnllyJr &Konopaske, 2003). The key word in this definition is control. Employees behaviour is controlled in the organization, they just don’t do what they want, they do what the organization wants and pay to do.
In the view of Griffin,(2014), because such structure is not designed to change rapidly, functional organizational structure works well in a stable environment where business strategies are less inclined to need changes or updating. This form of structure is particularly effective where there is a large volume of standardized product or sales, reduced level of change within the industry, etc. It is also effective where there are minimal changes dues to fashion or other changes in taste or technology where competition is primarily based on cost. Indeed, functional organization structure is ideal where activities of a business are organized around area of specialisation. It involves a considerable amount of process standardization with a business, with a real decision making authority centred art the top of the organization.
Weihrich ; Koontz,(2005), inform the functional organization is not only the most widely used basis for organizing activities but it is present in almost every enterprise at some level in the organization structure. In addition, Weihrich ; Koontz,(2005)list the following as advantages of functional organizational structure,
– Logical reflection of functions
– Follow principles of occupational specialisation
– Maintains power and prestige of major functions
– Simplifies training and furnishes means of tight control at the top.
Employees within the functional divisions of an organization tends to perform a specialised set of tasks. This leads to operational efficiencies within that group. However, it could also lead to a lack of communication between the functional group, within an organization, making the organization slow and inflexible. Lewis,(2003).
Also called a “product structure” , the divisional structure groups each organizational function into a division. Each division within a divisional structure contains all the necessary resources and functions within it. Lewis,(2004). Organizations that are spread over a wide area may find advantages in organizing along geographic lines so that all the activities performed in a region are managed together. In a large organization, simple physical separation makes centralized coordination more difficult. Dicheng,(2002).
The advantage of this type of structure is that the personnel in this grouping focus on the particular needs of their product line and become experts in its development, production, and distribution. A disadvantage, at least in term of large organizations, is the duplication of resources. Lewis,(2004). The divisional structure differs from the functional by grouping diverse functions into divisions. All the necessary resources such as manufacturing, research and development, and marketing are contained within each division. If the functional structure is organized according to the various inputs that enable an organization to produce goods and services, the divisional structure is organized according to the various outputs of the organization. Each division may be responsible for a different set of products, geographical markets, or clients. Thus, one can have product, region, market-segment, or client-based divisional structures.
The matrix structure groups employees by both function and product. This structure can combine the best of both separate structures. A matrix organization frequently uses teams of employees to accomplish work, in order to take advantage of the strengths, as well as make up for the weaknesses, of functional and decentralised forms. Lewis ; Mendon,(2004). The unique characteristics of the matrix form is that both divisional and functional structures are implemented simultaneously. The division managers and functional managers have equal authority within the organization, and employees report to both of them. Most of the firm’s employees will have dual assignments. Since the necessary resources in a matrix organization are distributed between functions and divisions, resource allocation in the form of scheduling and priorities must be negotiated among these groups.
Demsete,(1988), because the matrix structure is often used in organizations using the line-&- staff setup, it is also fairly centralised. Within the project or team unit, decision making can occur faster than in a line-&-staff structure, but probably not as quickly as in a line structures. The matrix structure is often overlaid on top of a company’s functional structure to tackle projects that involve multiple departments. Project managers recruit staff for their teams from different departments so that all the necessary functions work on it together. This offers companies flexibility and a better use of resources than a purely functional model. The downside is that authority and the chain of command become more confused, as team members answer to both the project manager and their department supervisor.
The networks are formed when the organizations are faced with rapid changes of technology, short life cycles of product and dispersed and specialised markets. In a network, required assets are distributed among some network partners as there is no unified organization in a network to generate the products or services and the networks is producer or supplier. In a network structure, the partners are associated via customers supplier relations and a type of free market system is created. It means that the goods are traded among network partners as in a free market, they are traded. Jo ; Batch,(2014). A network structure is ideally suited for volatile environments that change rapidly and dramatically and when innovation is the primary basis of strategic advantage. Under more stable conditions, the network structure may not be as effective as some of the other more traditional structure.
2.1.4 ORGANIZATIONAL STRUCTURE VARIABLES.
1. JOB SPECIALIZATION
The method of job specialization involves breaking down a task to its lowest level and designing jobs around each part. This creates specialization, expertise, and improved quality. Job specialization design in the workplace is frequently seen where a worker focuses on one specific task and ability during the entire work shift. The task frequently repeats all day long. Because job specialization allows significant expertise build-up in a specific task, the learning and speed of production happen faster. The job does not involve complex processes, so it can be taught faster to new workers. In theory, this approach reduces quality control costs and improves production efficiency (Thibodaux,2012). Job specialization is the degree to which the overall task of the organization is broken down into smaller component parts. It evolved from the concept of division of labor. There are four benefits of specialization: workers will become proficient at their task because it is small and simple, transfer time between tasks may decrease, the more narrowly defined the job is, the easier it is to develop specialized equipment to assist with the job and training costs should be relatively low. Conversely, the main problem with specialization is that workers can become bored and dissatisfied. This can lead to higher absenteeism and lower quality of work. It is also possible to overspecialize.
According to Thibodeaux,(2012), all companies initially have to decide upon an overall organizational structure that is, they have to decide how many jobs they will have and what the exact responsibilities of each job will be. This means using job specialization, which is just one of the processes human resources uses to categorize employees. Job specialization, also called work specialization or division of labor, is the process of separating all the activities necessary for the business or the organization into individual tasks. As part of this process, management, working with the human resources department, takes each task and assigns them to specific people/positions. The job descriptions human resources provides when they advertise open positions and hire new employees reflects job specialization. Job specialization becomes more necessary the larger an organization is. Organizations turn to job specialization any time activities are so complex that the business cannot rely on other employees to do a co-worker’s job. When organization uses job specialization, every worker is an expert to some degree. Employees are able to refine the task for which they are responsible, resulting in increased efficiency and increased production. Because each employee concentrates on just a portion of all activities, quality control costs also decrease in theory. All these factors mean a higher revenue and profit potential for the business. They also sometimes allow workers to take greater pride in their work, as their jobs require specific skills others may not be able to do. Even though job specialization creates experts, the experts cannot multitask. Specialization restricts them from filling in for someone who is gone. Subsequently, any organization’s activity connected to what the absent expert does may suffer. Additionally, specialized workers have a smaller skill set in some cases than non-specialized workers. With fewer skills, many employees find it harder to adapt and find other employment later.
Job specialization, also known as the division of labor, occurs when workers learn how to perform specific tasks very well rather than focusing on doing many different tasks. Job specialization is one of the key facets of the modern capitalist economy and offers a range of potential advantages for workers and the organizations that employ them (Hamel,2008). One of the most important aspects of job specialization is its potential to increase worker productivity and output. While productivity tends to benefit the employer of workers, specialization can also be advantageous to workers in that it may improve employment prospects. Workers with specialized skills are often more desirable than those with only general skills. Many jobs even require workers to have specific knowledge and skills just to be considered. For instance, most of the organizations dealing in computer often require that workers are versed in a specific software language. This is one of the primary reasons education is important: It allows workers to learn specialized skills. Job security is another potential advantage that specialized workers are likely to enjoy. A worker with a specialized skill that no one else knows is difficult for a company to replace. An employee with a tech support company who is the only one that knows how to recover data from crashed hard drives, is more valuable to the company than someone with no special job skills. If the company is forced to lay someone off, they will likely fire the person without the specialized skill.
Hamel,(2008) observed that although specialization can be advantageous, workers are often expected to have certain general skills as well. A worker with specialized skills that does not have general skills might be at a disadvantage when searching for a job. For instance, an expert in real estate law might not be as desirable to employers as someone with less experience if he doesn’t know how to use basic computer programs. According to London,(2012) specialization allows every person to be a professional in what he does. Specialization involves giving workers individual job roles to remove the responsibility of other jobs and reducing the worker’s capacity to one task in particular. There are many advantages and disadvantages to specialization, which became commonplace during the industrial revolution with the creation of factories. Factory owners would not simply hire one worker who produces all the goods. The work is divided among many different workers and each employee becomes a cog in a large machine. Perhaps the biggest advantage of specialization, emphasized by Karl Marx, is an increase in efficiency as workers become more skilled in the specific jobs they do. Workers in a factory who are responsible for only one part of the process become as skilled as they possibly can in that process without the distraction of learning other skills. Durkheim,(2009) wrote of the benefits of specialization in “The Division of Labor in Society.” He said the specialization of people in society into different labor roles brings more than just economic efficiency. He argues that the true function of specialization is to create a common feeling of solidarity between people. People are united by their common job role, form unions, socialize together and understand each other based on the similarity of their lives. One of the key disadvantages of specialization is that jobs often become monotonous. People like variety, and if their jobs become the same process over and over again, they become tedious, empty and unsatisfying.
London,(2012) also noted that specialization changed people’s roles in society. In the past people were involved in the whole process from the beginning to the end and they gained a sense of satisfaction from being useful to other people. With specialization, people rarely meet the end users of the products they produce and are merely selling their labor for a price as if it were a commodity. They become identical to other workers, job satisfaction decreases and a “just doing my job” work ethic reduces the quality of job performance.
Both advantages and disadvantages exist to employee specialization in the workplace. Rojas,(2012) asserted that when employees specialize in specific tasks of production, they develop an expertise in the work performed. This development in expertise enhances efficiency and reduces the costs of production. Specialization also has some drawbacks. Due to the repetitive nature of the work performed, employees can be subject to boredom and burnout. Units of specialized workers also have a tendency to be insular and may refrain from collaborating with other units. The biggest benefit derived from job specialization is the expertise employees develop over time in their chosen task. As employees become better at their jobs, they perform more efficiently and produce products with fewer defects and higher quality. The increase in worker output results in a greater number of products available for sale to the consumer. If workers use technology in the production process, they may be able to develop expertise in several production tasks. As employees perform more efficiently, Rojas,(2012) noted that the costs of production decrease. Efficient production results in greater worker output in less time and at a lower cost. These savings and enhancements pass on to consumers in the form of lower priced, higher quality products. These goods will likely generate higher profits since production is operating at an optimum level.
Fayol,1949, while describing the term ” departmentalization” stated that it refers to assemblage of individuals by units of related activities. He went ahead to mention that departmentalization can be implemented on the basis of job roles like those in the marketing department, finance department and human resource management departments among others. While backing Fayol’s definition, Montana ; Charnov,1993, echoed the definition by giving a similar meaning to that of Fayol. They defined departmentalization as the grouping of interrelated task into controllable units to attain the goals of the enterprise in the most effective and efficient way. Recent literature (Chhaya, 2015), also concurs with the argument that departmentalization is the foundation of organizational structure. This is because it allows for division of labor into smaller units and their consequential re-grouping into bigger units ( departments) on the basis of resemblance of features. As a result, each department is headed by (departmental manager). Departmentalization has the advantage of fronting for specialization in organizations since personnel in any given department undertake functions related to their department only. Similarly departmentalization offers a cope for organizations growth ( along the same line of product) and expansion ( addition of new product line). The contemporary organizations structures have enhanced grouping of related activities in one group and another different set of related activities in another. The essence of this practice is principally to reduce chances of duplication of functions. Managers and scholars alike have given this practice the name ” departmentalization”. The same scholars while illuminating on this term, endeavored to explain what the term meant for ease of comprehension and to avoid misuse of the same. This means that in circumstance where organizations have rigid departmentalization, each team or department is highly autonomous and can make independent decisions without the influence of another department tor the parent organization. On the other hand, loose departmentalization means the teams have more freedom to intermining that is to join forces.
The way an organization departmentalizes is often used as a replacement for the overall type of organization structure that an organization has ( Abdul-Rabb,2011). From the available literature (Unit-3IN5 Minutes,2013), a number of departmentalization types have been identified including; one, functional departmentalization, which designates departments by roles, such as purchasing, or accounting; two, product departmentalization, where companies or organizations manufacturing multiple products or services required to produce and market a product grouped together; three, geographical departmentalization, which is an arrangement of departments according to territory or geographic territory; four, customer departmentalization, in which customer divisions are divisions established to serve particular types of customers or clients, and ; five, process departmentalization, where departmentalization is done on the basis of processing. Consequently, departmentalization clusters functions into departments each headed by a manager responsible for activities in the division. Another concept that is often used in reference to departmentalization is division of labor. This is despite the prevailing technological differences. Whereas both emphasizes the use of specialized knowledge, departmentalization has greater management level and strategic considerations.(Abdul-Rabb,2011).
Large organizations particularly those multiple products often organize according to the product they produce. Similarly, common activities needed to produce and market a product are grouped together for effectiveness as well as efficiently.
3. CHAIN OF COMMAND
According to its proponent, Henri Fayol (1841-1925), in his 14 principles of management, the clearer cut the chain of command, the most effective decision making process and the greater efficiency. As an element of organizational structure, the chain of command refers to an organizations hierarchy of reporting relationships. This is important for all personnel within the organization to have a line of supervision for providing both direction and guidance but also to troubleshoot and advocate for resources and other needs related to accomplishment of goals. The chain of command not only establishes accountability, it lays out an organizations line of authority and decision making power. A proper chain of command ensures that every task, job position and department has one person assuming responsibility for performance. While maintaining a clear chain of command can be important to operational efficiency and accountability, understanding the human side of leadership and motivation of employees as well as supervisors should be considered as well in their Book “Being the Boss”; The 3 imperatives for becoming a great leader, Hill L.A ; Lineback L.K (2011), discuss the limit of authority in terms of commitment and motivation to drive change and work performance. This is sometimes referred to as the complexity of chain of command because its not absolute to dealing with employees in a positive ways. Furthermore, employees who break the chain of command by circumventing their supervisors can impact supervisors morale within the organization. Kassing,(2009), discusses the reasons that cause employees to circumvent their supervisors which can provide some good insight into supervisors performance and the strength of the organizations command hierarchy.
2.1.5 EMPLOYEE PERFORMANCE
Hohby,(2010) defined an employee as ” a person who is paid to work for somebody. The international labor organization elaborate this definition by stating that employees are people who work for a private or public employers and receive remuneration in wages, salary, commission, tips, piece rate, or pay in kind.
Martinelli,(2001) Performance is a set of financial and non financial indicators which offer information on the degree of achievement of objectives and results. It is also a measure of the state of an organization, or the outcomes that result from management decisions and the execution of those decisions by employees of the organization. According to (Profiroiu M.2001, p.8) Performance implies a relationship between objectives, means and results.
Hale,(2004: 2): job performance is doing meaningful work in effective and efficient ways”, this definition confirms performance is doing meaningful work in an effective and efficient way. Jex ; Britt,(2008: 96) defines performance as, “job performance is all of the behaviours employees engage in while at work”. This definition asserts that performance is all the behaviour of employees who are engaged in the work. In harmony with that definition, Campbell was quoted as saying by Jex ; Britt, “job performance represent behaviour employees engage in while at work that contribute to organizational goals”. Campbell stated that performance is the behaviour of the employees involved while in the workplace that contribute to achieving organizational goals.
According Mangkunegara,(2009: 67) performance is the work of quality and quantity achieved by an employee in carrying out its duties with the responsibility given to him. The high performance of employees is closely related to the reward system applied by the institutions / organizations where they work. Incorrect granting of honour can affect the improvement of one’s performance.
One of the elements that is assessable is the employee performance through the level of their productivity. Several researches have been introducing various methods to evaluate employee performance (Wong & Wong,2007, Prajogo, 2007). Employees should know what is expected, not just in terms of duties and responsibilities but also in standards of performance (Pilbeam & Corbridge, 2002).
Managing employee performance is an integral part of human resource management that all manager and rating officials perform throughout the year. Chris,(2011) testifies the fact that performance management is important as managing financial resources and program outcomes because employee performance or the lack thereof has a profound effect on both the financial and program components of the organization. The Oxford English Dictionary confirms this by including the phrase ” carryout” in its definition of performance.
According to Chaplin,(2005) Employee performance is defined as an individual outcomes based on the size and behavioral standards for the related jobs, and which led to an outcome, especially behavior that can change the environment in certain ways. A good performance by employee is necessary for the organization, since an organization’s success is dependent upon the employee’s creativity, innovation and commitment (Ramlall,2008). Even though employee productivity and employee job performance seems to be related, performance is in some cases measured as the number and value of goods produced. However, in general, productivity tends to be associated with production-oriented terms (e.g. profit and turnover) while employee performance is linked to efficiency or perception-oriented terms (e.g. supervisory ratings and goal accomplishments). Organizations need good employees and appropriate structure that will enhance their performance.
Organizations need highly performing individuals in order to meet their goals, to deliver the products and services they specialized in, and finally to achieve competitive advantage. Low performance and not achieving the goals might be experienced as dissatisfying or even as a personal failure (Sonnentag & Frese,2005). Managing employee’s performance is necessary for achieving goals that an organization has for itself. Assessing an employee’s competency and measuring his productivity is essential in the overall plan of the organization. Better performance of each employee creates immense outcomes which mainly include congruence among employees, quality production and commitment at work place (Sarmad et al., 2011).
EMPLOYEE PERFORMANCE VARIABLES.
1. EMPLOYEE PRODUCTIVITY
AbouRizk & Leonard,(2000) describe productivity as “a ratio of output over input that indicates the efficiency of a productive system”. Furthermore, they argue that the success of a business does not depend on a quality product, but the continual increase in productivity in other to remain competitive. The origin of productivity is deeply rooted in the context of mass production. Knowing what factors influence productivity is a prerequisite to improving performance. Over the years, researchers have found that productivity is affected by relatively few influencers, and employees are generally aware of what those influencers are. (Armstrong,2006; Clawson & Newburg,2005; Hankin,2004; Newstrom & Bitttel,2002; Williams,2003). Dozens of organizations have attempted to solve their productivity problems by application of various innovative management techniques (Balas,2004).
Meneze,(2006) defined productivity as the employee’s ability to produce work or goods and services according to the expected standards set by the employers, or beyond the expected standards. Employee productivity refers only to the output in relation to people employed and/or hours worked. Employee productivity could be measured at the individual level (for example, number of calls answered per shift in a call centre) or at a team level. Care must be taken when measuring employee productivity at an organisational level because of the differences in types of work between organisational units, although trends in employee productivity at the organisation level can yield interesting data for further investigation. ” A poor supervisor is definitely the number one factor that causes low productivity”. (Barry, 2007). “Happy employees are productive employees”.
2. EMPLOYEE EFFECTIVENESS
According to Peter Drucker,(2001) a founding father of management theory wrote, effectiveness is a minimum condition for survival after success has been achieved. Effectiveness is doing the right things. Effectiveness oriented companies are concerned with output, sales, quality, creation of value added, innovation, cost reduction. It measures the degree to which an organization achieves its goals or the way outputs interact with the economic and social environment. Usually effectiveness determines the policy objectives of the organization or the degree to which an organization realizes its own goals (Zheng,2010). The effectiveness of any organization is dependent on the quality of its personnel. According to Heilman ; Kennedy – Philips,(2011) effectiveness helps to assess the progress towards mission fulfilment and goal achievement.
Employee effectiveness can be assumed as enhanced level of employee performance that would lead to higher productivity. This assumption is supported by Terpstra ; Rozell (1994, p. 286). Some others have considered effectiveness of an organization as the degree or level of achieving an organizational objectives. Abdollahi, Bijan ; Abdolrahim Navehebrahim, 2006. Employees’ effectiveness is the survival and flourishing factors if each organization gains meaning from the employees. Thus, the closer the objectives of employees and those of manager and organization to each other, the easier it would be to achieve those objectives; therefore, the goals of managers and employees would be realized. Mintzberg,1983.
Organizational structure would have a positive impact on employee effectiveness; however, frustrated bosses often wonder why employees don’t perform as expected. According to Gilda,(1991, p. 4), “the first reason may be that the employee doesn’t know what is wanted”. This argument supports observations that employees without set goals may find themselves working ineffectively without direction and knowledge as to how they are performing or what value they are adding to the organization. Employee performance indicates the effectiveness of employee’s specific actions that contribute to attain organizational goals. To improve employees effectiveness, organization should strive for better communication, interaction, leadership, direction, adaptability and positive environment. Effectiveness is an exclusive performance measures. In order to achieve the excellence in employee performance, organizations should strive to increase the effectiveness indicators.
3. EMPLOYEE COMMITMENT
Organizations value commitment among their employees because it is typically assumed to reduce withdrawal behaviour, such as lateness, absenteeism and turnover. Hence, there is no doubt that these values appear to be potentially serious consequences for overall organizational performance. The study of employee commitment is important because Lo ,(2009) noted that employees with sense of employee commitment are less likely to engage in withdrawal behaviour and more willing to accept change. Most organizations have realised that the performance of their employees play a vital role in determining the success of the organization (Zheng, 2010, Ajila & Awonusi, 2004). One of the best antecedent determinants of employee performance is believed to be employee commitment.(Ali,2010: Ajila & Awonusi, 2004). A such it is important for employees and managers alike to know how to get the best of their employees.
Employee commitment has become one of the most popular work attitudes studied by practitioners and researchers. Akintayo & Tomwesigye,2010 noted that one off the reasons why commitment has attracted research attention is that organization depend on committed employees to create and maintain competitive advantage and achieve superior performance. Commitment employees who are highly motivated to contribute their time and energy to the pursuit of organizational goals are increasingly acknowledge to be the primary asset available to an organization. (Hunjra,2010). They provide the intellectual capital, for many organizations, has become their most critical asset ( Hunjra,2010). Furthermore employees who share a commitment to their organization and their collective wellbeing are more suitable to generate the social capital that facilitate organizational learning. Several factors had been identified in the literature as determinant of employee commitment. Some of the identified factor include: leadership style (Lo,2009); organizational fairness (Ponnu & Chuah, 2010) corporate social responsibility ( Ali et al,2010) etc.
Akintayo,(2010) employee commitment can be defined as the degree to which the employee feels devoted to their organization. Ongori,(2007) describe employee commitment as the degree of attachment or loyalty employees feel towards the organization. Zheng,(2010) describe employee commitment as simply employees attitude to organization. This definition of employee commitment is broad in the sense that employee attitude encompasses various components. Employee commitment seems to be a crucial factor in achieving organizational success. Individuals with low levels of commitment will do not only enough to work by. The relationship between employee commitment and employee performance has been studied under various disguise. Khan,(2010) investigated the impact of employee commitment ( Affective, Continuance & Normative Commitment) on employee performance. He advised managers to pay special attention to antecedent of employee commitment and all the factors that foster employee commitment so as to increase employee performance.
2.1.7 RELATIONSHIP BETWEEN ORGANIZATIONAL STRUCTURE AND EMPLOYEE PERFORMANCE
Louadi,(2008) conceptualize organizational structure as facilitating interactions and communication for coordinating and control of the organizations activities. Germain,(2006)conceptualize organizational structure as the way responsibility and power are allocated inside the organization and work procedures are carried out by organizational members. Thompson,(2005) define organizational structure as the organization’s internal pattern of relationships, authority, and communication. Similarly, Goldhaber et al,(2004) define organizational structure as “the network of relationships and roles existing throughout the organization”. Warren ; Dennis,(2005) defined organizational structure as the prescribed pattern of work related behaviour that are deliberately established for the accomplishment of organizational goals. March ; Simon,(2008) defines organizational structure as how job tasks are formally divided and coordinated. It is the hierarchical relations among members of the organization.
Organizational structure is also conceptualized as the procedure through which an enterprise is managed. It could also be defined as the framework within which management operates. Therefore, an organization structure refers to the arrangements of task, interrelations of various departments and levels of authorities to achieve co-operation of effort, delegation of authority, and effective communication along the scalar chain (ISMN Study Pack,2012). Daft,(2008) conceptualize organization as a social institution that is based on the target is consciously planned and coordinated with the active system that is associated with the external environment. Organizations is consist Individuals with together relationship and organizational structure assist organizations in the field of optimum use of its resources to achieve organization goals and strategies (Araghi,2008). Peter Drucker believes that organizational structure is method for achieve long-term and short-term goals in organization (Robbins,2000).
A good performance by employee is necessary for the organization, since an organization’s success is dependent upon the employee’s productivity, effectiveness and commitment (Ramlall,2008). Even though employee productivity and employee job performance seem to be related, performance is in some cases measured as the number and value of goods produced.
Organizational structure is not the only factor that affects employees performance. A well designed organizational structure can leads to a high level of employees performance. Conversely high employees performance does not necessarily imply that organizations are well structured. Mansoor et al,(2012) contend that ideal organizational structure is a recipe for superior performance. Qingmin, Helmut ; Juergen,(2012) study in Austria and China found that organizational structure influence performance directly and indirectly.
2.2 THEORETICAL FRAMEWORK
In relation to organizational structure and employee performance at work, several management theories would be considered in order to determine the theoretical application of such to specific issues concerning the effect of organizational structure on employee performance.
Organizations exist when people interact with one another to perform essential. ( Daft,2007), they are social units of people with recognizable boundary to meet certain goals (Robbins,1990). Organizations are the unities composed of mental activities of members with the same goals and technologies and operate in the certain relationship mode.( Liu,2007).
Organizational theories originate from organizational practices and in turn serve practices. Nicholson,1995 defines them as a series of academic viewpoints which attempts to explain the multiciplities of organizational structure and operating process. Organization theories are knowledge systems which study and explain organizational structure, function and operation and organizational group behavior and individual behavior ( Zhu,2000).
2.2.1 CLASSICAL ORGANIZATION THEORIES
In the early twentieth century, classical organization theories emerge with the vigorous development of industry. Taylor, Fayol ; Webb established the building and the development skeleton of classical organization theory, by defining respectively research objects: individual efficiency, enterprise organizational efficiency and social organizational efficiency. ( Guo, 2003). Classical theory was expounded in early writings of Max Weber and Henri Fayol. For the classicist, any organization achieves efficiency through its division of labor. Managers identify the overall purpose of the organization. They then divide this overall purpose into jobs, each rationally related to the whole. Jobs are, in turn, grouped to create work groups, divisions, and departments. Finally, each group is assigned a supervisor, who is responsible for overseeing the work of subordinates and reporting the results to his or her own superior.
Classical organization theories emphasized the organizational characteristics are impersonal and rational and focus on the design of the organizational structure, the basic principles and the basic administration function of organizations. ( Liu,2010). the classical theories are the typical philosophy on human machine- relationship perspective, basing or economic- man hypothesis. In this period, the metaphors of an organization and individuals are ” machines” and “gears”, ” screws”. People lost their humanity in society into a machine and lost initiative in the work. ( Luo,2009). Classical organization theory is dealt with hierarchical levels of authority and coordination along with horizontal differentiations between units (Shafritz et al,2005).
The theories basing on human- relationship perspective substitute the mechanical, static, structural and physiological researches for humanized, dynamic, functional, psychological researches. ( Liu,2007).
2.2.2 CONTINGENCY THEORY.
Contingency theory is an approach to the study of organizational behavior in which explanations are given as to how contingent factors such as technology, culture and the external environment influence the design and function of organizations. The assumption underlying contingency theory is that no single type of organizational structure is equally applicable to all organizations. Rather, organizational effectiveness is dependent on a fit or match between the type of technology, environmental volatility, the size of the organization, the features of the organizational structure and its information system. Contingency theories were developed from the sociological functionalist theories of organization structure such as the structural approaches to organizational studies by Reid ; Smith,(2000), Chenhall,(2003); Woods,(2009).
According to contingency theory, there is no best way of organizing; the appropriate form depends on the nature of the ?rm’s task environment (Donaldson,2001). Instead, the structure that is most effective is the structure that fits certain factors, called contingencies. Thus the effectiveness of a structure depends on the degree to which it fits the contingencies. Some of the contingencies of organizational structure are the degree of uncertainty of the environment of the organization, organizational strategy, and organizational size. The contingency theory of organizational structure presently provides a major framework for the study of organizational design (Donaldson,2001). The contingency approach to management is based on the idea that there is no one best way to manage and that to be effective, planning, organizing, leading, and controlling must be tailored to the particular circumstances faced by an organization.
The contingency approach to management (also called the situational approach) assumes that there is no universal answer to such questions because organizations, people, and situations vary and change over time. Thus, the right thing to do depends on a complex variety of critical environmental and internal contingencies.
2.2.3 Max Weber Bureaucracy Theory
Weber,(1922) defines a bureaucracy, a specific set of structural arrangements, and how those in the organization function. Weber’s Bureaucratic Model is a classic model of organizational design that is still in use today. It involves structuring an organization hierarchically with formal rules and procedures that govern the organization and its members. Rabie,(2004) defines bureaucracy as a management system invented to handle state affairs and organize state relationships with its citizens. As it developed further, it helped different types of organizations in managing their internal and external affairs. Thus, standardization of procedures, keeping records of transactions, and organizing decision making processes have become essential components of every management system.
Cordella,(2007) ; Gay,(2000) who asserts that bureaucracy still remains as a sustainable and successful way of structuring large organizations, particularly in steady repetitive contexts and tasks. Chris,(2006) acknowledges the role of bureaucracy in managing the processes for the implementation of policies and procedures pointing out that it’s an essential aspect of all organizations. On the contrary, he stresses that when bureaucracy becomes self-serving and self-perpetuating, it creates problems in the organization such as inefficiency, consumption of unnecessary resources, slow process response time, slow adaptation to innovation and change. Rabie,(2004) points out the advantages of bureaucratic management which include: facilitating people and situation management, predicting outcomes of actions, and reducing chances for unpleasant surprises. Undermining employees’ ability to take initiative and be creative, creating mind that lacks curiosity and with limited functions, hindering organizational transformation, undermining the organization’s ability to adapt to changes and respond to challenges.
Characteristics of Bureaucracy (Shafritz et al,2005) • There is the principle of fixed and official jurisdictional areas, which are mostly ordered by rules, that is, by laws or administrative regulations. • The principles of office hierarchy and of levels of graded authority mean a firmly ordered system of super and subordination in which there is a supervision of the lower offices by the greater ones. • The management of the modern office is act upon written documents (the files) which are secured in their original or draught form. • Office management, at least all specialized office management and such management is distinctly modern usually presupposes via and expert training. • When the office is fully developed, official activity demands the full working capacity of the official, irrespective of the fact that his obligatory time in the bureau may be firmly delimited. • The management of the office follows general rules, which are more or less stable, more or less exhaustive, and which can be learned.
2.2.4 SYSTEM THEORY.
Organizational management systems consist of many internal subsystems that need to be continually aligned with each other. As companies grow, they develop more and more complex subsystems that must coordinate with each other in the process of transforming inputs to outputs (McShane & Von Glinow,2003). These interdependencies can easily become so complex that a minor event in one subsystem may amplify into serious unintended consequences elsewhere in the organization. Every organized enterprise does not exist in a vacuum. It is rather known to depend on its external environment – which is a part of a larger system, such as the industry to which it belongs, the economic system and the society (Weihrich et al, 2008). According to them, the organization receives inputs, transforms them and exports the outputs to the environment.
According to Von Bertalanffy,(1968), the term system implies a set of elements standing in interactions. He defined system as complexes of elements standing in interaction, expressed in different forms. It is a set of activities (functions) that are connected both in time and space by a set of decision-making and behavior evaluation (that is control) practice (Hall & Fagen,1956). Waring,(1996) defines a system at a simple level as a recognizable whole, which consists of a number of parts (called components) that are connected up in an organized way (the system’s structure). These components interact, that is, there are processes going on. This basic description covers the popular idea of interconnected parts and processes as in the central heating system. It is further argued that, system approach to management implies the application of systems ideas such as emergence and hierarchy (layered structure), communication and control to address problem situations (Jackson,1995).
(Mullins,2005) revealed that the systems approach encourages organizations to be viewed both as a whole and as part of a larger environment. This implies that any part of an organizational activity affects all other parts. The business organization is an open system where there is continual interaction with the broader external environment of which it is a part. The systems approach sees the organization within its total environment and emphasizes the importance of multiple channels of interaction. The systems approach views the organization as a whole and involves the study of the organization in terms of the relationship between technical and social variables within the system. The systems theory of management in modern day organizations is a veritable scholarly tool for the academic world. It fosters additional management knowledge to the business world thereby increasing the survivability and profitability ratios of these organizations.
2.3 EMPIRICAL FRAMEWORK
The findings of an empirical survey of ‘Organizational structure and its effects on employees performance’ found that there is a significant relationship between organizational structure variables and employees performance for employees in organizations.
Gibson et al,(2012: 398) says “organizational structure is the pattern of jobs and group of jobs in an organization. An important cause of individual and group behaviour. The organizational structure is the pattern of work and group work within an organization. Organizational design and structure has always been an important factor influencing the behaviour of individuals and groups within the organization. Rezayian,2005, ‘The organization creates the structure to coordinate the activities of work factors and control the members action’. The primary purpose of organization structure is to influence the behavior of individuals and groups to achieve effective performance.
Organizations began to realize that the success of the enterprise was dependent upon productivity of the employees to the firm.
Rojas,(2012) asserted that when employees specialize in specific tasks of production, they develop an expertise in the work performed. Hamel,2008 One of the most important aspects of job specialization is its potential to increase employees productivity and output.
Montana & Charnov,1993 echoed the definition by giving a similar meaning to that of Fayol. They defined departmentalization as the grouping of interrelated task into controllable units to attain the goals of the enterprise in the most effective way. Similarly, common activities needed to produce and market a product are grouped together for effectiveness. Defining departmental effectiveness the profile is based on the assumption that an effective department achieves key performance.
Hill & Lineback,(2011), discuss the limit of authority in terms of commitment and motivation to drive change and work performance. This is sometimes referred to as the complexity of chain of command because it’s not absolute to dealing with employees in a positive ways. Furthermore, employees who break the chain of command by circumventing their supervisors can impact supervisors morale within the organization. Kassing,(2009) discusses the reasons that cause employees to circumvent their supervisors which can provide some good insight into supervisors performance and the strength of the organizations command hierarchy.
2.4 CONCLUSION AND GAP IN LITERATURE
We can therefore conclude that the issue of employee performance has been in existence for quite some time now. In today’s world it is both desirable and incumbent employees should perform well for the organization to do so as well.
Essentially there is a gap between all the works of the various researchers examined in this research and in my findings on the topic “Organizational structure and its effects on employees performance”. Other researchers agreed to the fact that organizational structure does not really have an effect on employees performance.
Organizational structure has been defined in various ways and each definition is based on the authors background. Sometimes these definitions may be done simply in two or three lines and other times they may run into many paragraphs.
Organizational structure refers to how an organization is put together. Structure reflects some of the underlying ways that people interact with one another in and across jobs or departments (Ronald,2002). Organizational structure refers to how job tasks are formally divided, groped, and coordinated.
Some of the primary advantages of organizational structure includes: effective sharing of goals, team work, High employee morale, Offer training opportunities. Organizational structure is used by various firms as a control mechanism to affect employee work outcomes, to ensure that the required tasks are performed effectively and efficiently, and to assist the attainment of organizational goals and objectives (Katsikea et al,2011).
A well structured organization can aid employees achieve their desired level of effectiveness, productivity and commitment which can lead to high employee performance. The success of any organization can be predicted by its success in raising and maintaining employees’ performance.
The results of this study concluded as follows organizational structure is needed in directing the performance of the members of the organization, because the performance shown by the members of the organization will have an impact on the achievement of overall organizational goals.