Effect of organizational structure on business performance
Numerous empirical research studies have shown that the organic organizational structure is positively related to firm performance, while a mechanistic organizational structure has been shown to have a negative effect on organization performance. In other words, a less formalized organizational structure leads to better business performance. In addition, a more decentralized organizational structure leads to enhanced organizational performance. Also, research findings indicate that a unit increase in decentralization, communication, span of control, functional structure, or centralization would result in increased organizational performance.
Following are some of the empirical studies showing the effect of organizational structure on business performance.
This study investigated the effect of mechanistic structure on attainment of corporate goals of MTN Telecommunications PLC Enugu. It also sought to establish the effect of organic organizational structure on employees’ commitment in the target company. The target population included the entire 121 staff of MTN Enugu. Data collection was conducted using questionnaires and interviews. The simple linear regression technique was employed in data analysis. The findings were presented using relevant tables (Agu et al., 2023).
The findings indicated that mechanistic organization structure harmed the performance of MTN Telecommunications PLC Enugu. On the other hand, the results revealed that organic organizational structure had a positive effect on employee commitment in MTC Telecommunications Enugu. The researchers thus concluded that organization structure affects the efficiency and productivity of the organization as well as the morale and job satisfaction of the employees (Agu et al., 2023).
This study explored the influence of organizational structure on the performance of local government in Nepal. The target population included all the municipal staff and officials of Lalitpur Metropolitan City and Godawori Municipality, Nepal. The sample size included 30 staff members from the target organization. Data collection was done using questionnaires and in-depth interviews. Data analysis was done using descriptive statistics (Kaphle, 2023).
According to the findings, the target organization was shown to have a formalized structure. The results also indicated that less downward accountability exists in the target organizations, which may hinder effective communication and feedback between management and staff. The results also showed that the organizations’ goals and objectives are clear to the staff. It was also established that less differentiation exists in the target organizations. The results also showed that the existing organization structure does not support organizational performance in the target population (Kaphle, 2023).
This study explored the effect of patterns of communication, span of control, task allocation, and work procedures on the performance of county governments in Central Kenya. The target population included 5 counties from central Kenya. 252 participants were drawn from the 735 employees of the 5 counties. Data collection was done using an electronic questionnaire. Descriptive statistics were used to analyze quantitative data. Inferential statistics, specifically the multiple regression model, was used to establish the relationship between variables under study. The results were presented using frequencies, percentages, mean, and deviation scores (Wangui et al., 2021).
The findings revealed that a unit increase in pattern of communication, span of control, task allocation, and work procedures led to an increase in county performance. Thus, the researcher concluded that organization structure has a positive influence on the performance of the counties in Central Kenya (Wangui et al., 2021).
This study investigated the effect of hierarchical layers, nature of formalization, and communication structure on performance effectiveness. The target population included 80 staff and consumers of the selected firms. Questionnaires were used as the main tool of data collection. The collected data were analyzed using descriptive statistics, including frequencies, percentages, and means. The Pearson correlation analysis was used to establish the relationship between the variables under study. Regression analysis was used to establish the effect of each independent variable on performance effectiveness. The results were presented using relevant tables (Orishede & Echimina, 2022).
The findings revealed that all the independent variables, that is, numbers of hierarchical layers, nature of formalization, and communication structure, had a positive effect on performance effectiveness in the targeted Nigerian firms. This means that fewer hierarchical layers, less formalized structures, and better communication structures can increase a firm’s performance effectiveness (Orishede & Echimina, 2022).
This study sought to establish the influence of decentralization structure, formal meetings and communications, formal structures, hierarchical structures, and line of authority/command on the performance (profitability, ROE/ROA, sales volume, market share, number of clients, and cost of operations) of commercial banks in Kenya. The study adopted a descriptive cross-sectional census survey. The target population included all the commercial banks in Nairobi, Kenya. Primary data was collected from 40 operations and finance managers in target banks. Questionnaires were the main instrument of primary data collection. Data analysis was done using descriptive statistics, including frequencies, mean, and standard deviation. Inferential statistics, specifically regression analysis, was used to establish the relationship between the variables under study. The findings were captured in relevant tables (Oduor, 2022).
The results of the study revealed a statistically significant positive relationship between the independent variables (structure formalization, structure centralization, formality, line of communications, and command systems) and the dependent variable (organization performance). This means that a unit increase in either of the independent variables led to a corresponding increase in the performance of commercial banks (Oduor, 2022).
This study explored the effect of teamwork, learning, and boundless organizational structures on the performance (profit margins and market share) of MTNOs in Kenya. The target population included all the 6167 staff of the three MTNOs (Safaricom, Airtel, and Telecom) in Kenya. A sample size of 361 employees was used for the study. Questionnaires were used to collect primary data from the selected participants. Data analysis was done using descriptive statistics, including mean and standard deviation. Correlation analysis was used to establish the relationship between the dependent and independent variables. Regression analysis was used to establish the influence of organizational structure on company performance. The findings were presented using frequencies, percentages, and means in appropriate tables (Karemu et al., 2021).
The findings revealed that the team organizational structure, learning organizational structure, and boundary-less organizational structure have a positive and significant relationship with the performance of the MTNOs in Kenya. This means that the organization’s structure has an impact on the financial performance of commercialized state corporations in Kenya (Karemu et al., 2021).
This study examined the relationship between organizational structure and organizational effectiveness in the Korea Water Resources Corporation. The target population included employees of K-water’s Hangang River Regional Head Office. Data collection was done using questionnaires. The questionnaire was comprised of items for measuring organizational structure, that is, formalization, organization decentralization, and organizational complexity. It also contained items for measuring organizational effectiveness represented by job satisfaction and organizational commitment. The frequency analysis technique, descriptive statistics, the independent sample t-test and one-way ANOVA analysis, correlational analysis, and multiple regression analysis were all used to process the collected data. Results were presented using frequencies, percentages, means, deviations, and minimum and maximum values (Lee, 2020).
According to the findings, high awareness of formalization led to increased job satisfaction and employee commitment. Secondly, decentralization was shown to have a positive relationship with job satisfaction and employee commitment (Lee, 2020).
The study sought to establish the relationship between organizational structure and performance in Civil Society Organizations Agency (CSOA) in the Federal Democratic Republic of Ethiopia. Specifically, the researcher sought to determine employees’ and managers’ perceptions of organizational structure and how it affects organizational performance. Explanatory research design was used for the study. In addition, both qualitative and quantitative research techniques were employed in this study. The target population included all the 128 employees of the CSOA. Questionnaires were used to collect data from the respondents. Descriptive statistics including frequency and percentage were used in the study to measure the level of perception of employees regarding organizational structure and performance. Inferential statistics including correlation and regression were used to comprehend the relationship between organizational structure and performance. Findings were presented using appropriate tables (Feleke, 2019).
According to the results, the effect of six organizational structure variables on performance was as follows: Task routine was found to have a significant effect on organizational performance; formalization was found to have a less significant effect on organizational performance; professionalism was also shown to have a less significant effect on organizational performance; standardization also had a less significant effect on organizational performance; span of control was shown to have a significant effect on organizational performance; decision-making was found to have a significant effect on organizational performance (Feleke, 2019).
This study explored the impact of specializations, departmentalization, span of control, hierarchy, delegation, formalization, and coordination on profitability, growth, and owners’ satisfaction of SMEs in the Western Province of Sri Lanka. The target population included 383 SMEs in the Western Province of Sri Lanka. Data collection was done using a Structured Survey Questionnaire (SSQ). Data analysis was done using the Structural Equation Modeling (SEM) technique with AMOS. The findings were presented in relevant tables, respectively (Udayanga et al., 2019).
According to the results, specialization, departmentalization, and span of control were shown to have a positive impact on SME performance in Sri Lanka. On the other hand, the results indicated that hierarchy and delegation were shown to have a negative impact on the performance of SME in the study area. In addition, both formalization and coordination were found not to have a significant effect on the performance of SMEs in the study area (Udayanga et al., 2019).
This study explored the effect of complexity, formality, the nature of hierarchical layers, and technology type on company performance in Indonesia. The target population included 24 companies operating in industrial zones in Batam City, Indonesia. 190 respondents drawn from the target companies took part in this study. Questionnaires were used to collect data from the identified respondents. Data analysis was done using a correlational coefficient and regression model. The results were presented using relevant tables (Muhammad, 2019).
The findings indicated that complexity and the nature of hierarchical layers have a positive but insignificant influence on the performance of the company. On the other hand, formalization and technology type were found to have a positive and significant influence on the performance of the company (Muhammad, 2019).
This study investigated the relationship between organizational structure and performance at General Electric Africa. Specifically, the study sought to establish how the speed of decision-making and the quality of decision-making affect performance, how organizational learning impacts performance, and whether the efficiency of communications systems impacts organizational performance. Descriptive research design was used in this study to help establish the causal relationship between the dimensions of organizational structure and organizational performance. The target population for the study included 290 employees drawn from the Nairobi and Johannesburg branches of the General Electric Africa company. A structured questionnaire was used to collect data from the respondents. Descriptive statistics were used to analyze the collected data. Regression analysis was also undertaken in order to establish the relationship between the dependent and independent variables (Onono, 2018).
The findings revealed that organization structure has a significant effect on the speed and quality of the decision-making process. The results also showed that organizational learning positively impacts the performance of the company, making it have a competitive advantage over its rivals. Furthermore, the results also indicated that communication systems at the General Electric company were efficient enough to impact the performance of the company (Onono, 2018).
This study examined the influence of centralization and formalization on organizational structures and performance measures such as sales, profits, and customer satisfaction. The study adopted a quantitative research design approach. The target population included 51 employees and 303 customers of Covenant Micro Finance Bank. Questionnaires were used to collect data from respondents. Descriptive statistics and correlational analysis were used to process the collected data. The results were presented in frequency tables and percentages (Eze et al., 2017).
The results indicated that organizational centralization had a significant influence on customer satisfaction. However, the results showed that there was no relationship between organizational centralization and organizational profit. Furthermore, the results established that there was no relationship between organizational formalization and customer satisfaction. The findings also showed that there was no significant relationship between organizational formalization and organizational profit (Eze et al., 2017).
This study explored the effect of organization structure on organizational growth, organizational effectiveness, and organizational innovativeness in pharmaceutical manufacturing firms in Enugu State, Nigeria. The target population included 3 pharmaceutical manufacturing firms in the study area. A sample size of 297 respondents was selected from 468 staff members of the three firms. Both primary and secondary data were collected in this study. Questionnaires were the main tool for collecting primary data. Descriptive statistics, including frequencies, mean, standard deviation, and variance, among others, were used to analyze the collected data. Simple linear regression and correlation were used to establish the relationship between the variables under study. The results were presented in appropriate tables (Nwonu, 2017).
According to the findings, organizational structure was found to have an insignificant influence on organizational growth in the target companies. Secondly, the results showed that the effect of organization structure on organizational effectiveness was significant. Finally, the study established that organization structure had a significant influence on organizational innovativeness in the target companies (Nwonu, 2017).
This study investigated the relationship between bureaucratic structures and organizational performance in the Kampala City Authority and the National Planning Authority in Uganda. Specifically, the study explored the influence of hierarchical order, rigid rules and procedures, interpersonal relationships, and bureaucratic leadership style on organizational performance. The target population included the KCCA and the NPA. The study examined secondary data about KCCA and NPA organizational structures and their delivery of public goods and services (Matte, 2016).
According to the findings, bureaucratic structures were found to be effective if provided with the necessary resources and where organizational hierarchy is not ambiguous. The findings also revealed that operational guidelines play a crucial role in operationalizing organizational structures. Proper popularization and enforcement of operational guidelines were shown to reduce organizational impunity and improve performance. The results also indicated that a rational leadership style that is uncompromising helps the organization to realize leverage in the delivery of strategic outputs (Matte, 2016).
This study sought to establish the effect of organic and mechanistic structures on the performance of the organization in terms of net profit, return on asset, and sales growth. In addition, the study sought to explore how the hostility of the environment moderates the relationship between organic structure and firm performance. The target population included the 138 large firms listed on the main board, Bursa Malaysia. Data collection was done through mail surveys. The PLS-SEM technique was used to test the impact of organization structure on firm performance. The findings of the study were presented in relevant tables (Sylvia & Kalsom, 2015).
The findings revealed that the organic organization structure was positively related to firm performance. In other words, a less formalized, decentralized, less specialized organizational structure leads to higher organization profitability and growth. It was also established that environmental hostility has a moderating effect on the relationship between organic organizational structure and firm performance. This implies that when the environment is hostile, risky, stressful, and hard to keep afloat, the organization’s structure tends to become less formalized, specialized, and decentralized in order to register higher firm performance (Sylvia & Kalsom, 2015).
This study investigated the impact of decentralization on decision-making, the extent to which task routine affects staff productivity, and the relationship between span of control and organizational efficiency. The target population included Innoson Nigeria Ltd and Etisalat, Enugu Regional Office. Both primary and secondary data were used in the study. Primary data collection was done using questionnaires. 80 respondents participated in the current study. Correlation analysis was done to establish the Chi-square test was used to test the hypotheses put forward in the study. The findings were presented in relevant tables (Ogbo et al., 2015).
According to the results, decentralization was found to enhance decision-making in the target organization. In addition, task routine was found to affect staff productivity both positively and negatively depending on worker preference and the time frame. In addition, the results showed that there was a positive and significant relationship between span of control and organizational efficiency (Ogbo et al., 2015).
This study sought to establish the influence of centralization, functional structures, communication, span of control, and decentralization on the performance of the Nursing Council of Kenya. A descriptive research design was adopted for the study. The target population included all the employees at the NCK. 40 employees were selected to participate in this study. Data collection was done using a questionnaire and interview guide. Multiple regression analysis was used to establish the relationship between the dependent and independent variables. The findings were presented using frequencies and percentages in appropriate tables (Osano & Gachunga, 2013).
The findings revealed that centralization had the largest influence on organization performance, followed by functional structure, communication, decentralization, and span of control, in that order. Specifically, the findings revealed that a unit increase in decentralization, communication, span of control, functional structure, or centralization would result in improved performance at the NCK (Osano & Gachunga, 2013).
This study set out to establish the relationship between organizational structure, organizational learning, and innovation and their influence on a firm’s performance. The target population included all the small firms in Austria and China. Data was collected using an e-mail survey and through a questionnaire. 270 questionnaires were dispatched to respondents. Data analysis was done through a partial least squares (PLS) model (Hao et al., 2012). The results were presented using relevant tables (Hao et al., 2012).
According to the results, organizational structure was found to have more effect on organizational learning than on innovation. Organizational learning was shown to have an indirect effect on performance through innovation. The findings also indicated that Austrian managers think that structure has a more important effect on performance. They also believed that managerial and technical innovation has a significant influence on performance. According to the Chinese managers, managerial innovation is not significant. The results also indicated that Austrian firms prefer structural-oriented innovation while their Chinese counterparts prefer learning-oriented innovation. The findings also established that in a knowledge-intensive or high-tech industry, organizational structures affect firm performance, mainly through innovation and organizational learning. However, in a traditional industry, such as a capital-intensive or labor-intensive industry, organizational structure influences firm performance through innovation (Hao et al., 2012).
Citation
Agu, J.C., Ero, K.A., Okoro, J.C., Chike-Aliozor, V.U. (2023). Effect of organizational structure on performance of telecommunication companies in Enugu, Nigeria. International Journal of Management Studies and Social Science Research, 5(4).
Eze, S.C., Bello, A.O., and Adekola, A.T. (2017). The effects of organizational structure on the performance of organizations. European Journal of Business and Innovation Research, 5(6), 46-62.
Feleke, A.M. (2019). The effect of structure on organizational performance: the case of civil society organizations’ agency. Unpublished Master’s Thesis submitted to St. Mary’s University, School of Graduate Studies.
Hao, Q., Kasper, H., and Muehlbacher, J. (2012). Chinese Management Studies, 6(1), 36-52.
Kaphle, S.A. (2023). Organizational structure and its impact on performance. CDC Journal, 31(45).
Karemu, G., Nyakora, M., Thoronjo, E., and Mandere, E. (2021). An investigation of the influence of organizational structure on the performance of mobile telephone network operators in Kenya. European Journal of Business and Management Research, 6(3).
Lee, C. (2020). A study on the relationship between organizational structure and organizational effectiveness: the case of the Korea Water Resources Corporation (K-water). Unpublished Master Thesis submitted to the KDI School of Public Policy and Management.
Matte, R. (2016). Bureaucratic structures and organizational performance: a comparative study of Kampala capital city authority and national planning authority. Journal of Public Administration and Policy Research, 9(1), 1-16.
Muhammad, D.M. (2019). Effect of organizational structure on company performance in the manufacturing industry. International Journal of Research and Innovation in Social Science (IJRISS), 3(10).
Nwonu, C. (2017). Effect of organizational structure on performance of selected manufacturing companies in Enugu State, Nigeria. International Journal of Business and Management, 5(5).
Oduor, L.A. (2022). Influence of organizational structure on organization performance among commercial banks in Kenya. A Master’s Thesis submitted to the faculty of Business and Management Science, University of Nairobi.
Ogbo, A.I., Chibueze, N.F., Christopher, O.C., and Anthony, I.A. (2015). Impact of structure on organizational performance of selected technical and service firms in Nigeria. Corporate Ownership & Control, 13(1).
Onono, E.O. (2018). The impact of organizational structure on performance at General Electric Africa. Unpublished Master’s Thesis submitted to the Chandaria School of Business, United States International University-Africa.
Orishede, F. and Echimina, E.C. (2022). Mixed organizational structure and performance effectiveness. Advance Journal of Management and Social Sciences, 6(6).
Osano, M.K. and Gachunga, H.G. (2013). Effects of organizational structure on organizational performance at the Nursing Council of Kenya. International Journal of Social Sciences and Entrepreneurship, 1(7), 1-12.
Sylvia, N.A.A. and Kalsom, A.W. (2015). The impact of organizational structure on firm performance: evidence from Malaysian large firms. Australian Journal of Basic and Applied Sciences, 9(28), 97-104.
Udayanga, M.V.S.S., Yajid, M.S.A., Khatibi, A., and Ferdous Azam, S.M. (2019). The impact of organizational structure on the performance of small and medium enterprises in the Western Province of Sri Lanka. International Journal of Latest Engineering and Management Research (IJLEMR), 4(4), 58-71.
Wangui, C., Muhoho, J., and Kahuthia, J. (2021). Effect of organizational structure on performance of county governments in the Central Region, Kenya. Journal of Business Studies Quarterly, 11(1).
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