THE EFFECT OF ORGANIZATIONAL STRUCTURE ON ORGANIZATIONAL PERFORMANCE

THE EFFECT OF ORGANIZATIONAL STRUCTURE ON ORGANIZATIONAL PERFORMANCE

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CHAPTER ONE

INTRODUCTION

1.1       BACKGROUND OF THE STUDY

The term organization has been defined in several ways. Leavitt (1962:55-70) defines it as a specific configuration of structure, people, task and techniques. Structure describes the form of departments, hierarchy and committees. It influences the organization's efficiency and effectiveness and thus organizational structure refers to the institutional arrangements and mechanisms for mobilizing human, physical, financial and information resources at all levels of the system (Sachdeva, 1990:14).

There is a long standing concern that strategic literature needs a better understanding of how organizational structure and decision-making affect organizational performance. This concern goes back at least to Cyert and March (1963:45), who used the following questions in motivating their theoretical enterprise; “What happens to information as it is processed through the organization? What predictable screening biases are there in an organization?, How do hierarchical groups make decisions?” But with a few exceptions, questions of this sort remain mostly unexplored (Rumelt et al., 1994:78). This lack of knowledge regarding how decision making structure affects organizational performance continually resurfaces in different areas of management, for example, in the context of ambidextrous organizations, Raisch and Birkinshaw (2008:375-409) note that far less research has traditionally been devoted to how organizations achieve organizational ambidexterity. These observations are congruent with the view that organization design is the field that is specifically devoted to studying the linkages between environment, organizational structure, and organizational outcomes, however despite management long history, it is in many respects an emerging field of study (Daft and Lewin, 1993:1-6; Zenger and Hesterly, 1997:209-222; Foss, 2003:331-349).

1.2       STATEMENT OF THE PROBLEM

Good organisational structure does not by itself produce good performance. But a poor structure makes good performance impossible, no matter how good the individual managers may be. To improve organisational structure will therefore improve performance. Therefore, it is vital that members of the organisation understand what the organisation stands for and the grounds on which it can be justified because it is not just a means to achieving better economic performance but also it exerts a profound influence on the society. Therefore, structure should be designed so as to encourage the willing participations of members of the organisation for effective performances and job satisfaction. However as often observed, when the structures are not designed properly, problems such as the following may lead to low profitability; high employee turnover and poor service quality leading to loss of customers.

The functions of the formal structure and activities often exist independently of the members of the organizations who carry out the work. However personalities are an important part of the working of the organisation. In practice the actual operation of the organisation and success in meeting its objectives will depend upon the behaviour of people who work with the structure and who gives direction, shape and personality to the organizations’ framework. Therefore when the human element are not organized in layers in terms of the structure, the organisation will live in a state of anarchy, thus affecting performance, This will eventually leads to low productivity hence low profitability.

Organisational design is the choice of appropriate structure for the organisation. Some corporate managers often do not critically align the structure of the firm with its nature and scope. This non- alignment makes the mechanism for corporate effort and desired organisational performance difficult to be actualized. In a state where no one is given order in that chain of command creates a situation of ineffective leadership, conflict role overlap. Employees’ morale is thus affected in such an organisation leading to high labour turnover which is unhealthy for the growth of the firm. Labour turnover is often seen as the flow of manpower into and out of an organization, in which the inflow is referred to as accession and the outflow as separation hence seen as one of the unorganized forms of industrial conflict in which employees usually retreat from unsatisfactory situations.

1.3       OBJECTIVES OF THE STUDY

As a result of the problems stated above, the primary objective of this study is to examine the effect of organizational structure on organizational performance. In line with this the specific objectives are as follows:

1.      To examine the nature of relationship between structure and performance of Small and Medium Scale enterprise in Nigeria

2.      To evaluate the effect of structure on the Job satisfaction of Worker in Small and Medium Scale enterprise in Nigeria

3.       To determine the effect of structure on entrepreneurs’ performance on Small and Medium Scale enterprises in Nigeria

1.4       RESEARCH QUESTIONS

This research study is poised towards providing answers to the following questions:

1.       What is the nature of the relationship between structure and performance of Small and Medium Scale enterprises in Nigeria?

2.      What is the effect of structure on the Job satisfaction of Entrepreneurs in Small and Medium Scale enterprises of Small and Medium Scale enterprises

3.      To what extent does structure have an effect on entrepreneurs’ performance in Small and Medium Scale enterprises in Nigeria?

1.5       RESEARCH HYPOTHESES

In order to answer the research questions and achieve the objectives of the study, the following hypotheses are advanced and will be tested in the course of this study.

Ho1:     There is positive relationship between structure and performance of Small and Medium Scale enterprises in Nigeria

Ho2:     Structure have significant positive effect on the Job satisfaction of Entrepreneurs in Small and Medium Scale enterprises of Small and Medium Scale enterprises

Ho3:     Structure of SMEs has significant positive effect on entrepreneurs’ performance.


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