Assessing the effect of the current organizational structure on the performance of CDC
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1.1 Background to Study
Once the decision has been made to undertake a business venture, it is essential to
plan and establish a structure for the organization in a way that maximizes efficiency
and profitability. Walton (1985) defines structure as “the basis for organizing, to
include hierarchical levels and spans of responsibility, roles and positions, and
mechanisms for integration and problem solving”.
Organizational structure is defined as the established pattern of relationships among
the components of a company, that is, the way in which the company has been set up;
the formally defined framework of an organization‟s tasks and authority relationships.
This goes in to say that all the duties and responsibilities of all those working in the
company ought to be clearly identified and all areas of authority be clearly spelt out
and designated such that every employee knows and understands his or her job
By so doing a clear distinction is made between top members of the
company and ordinary workers, those responsible for decision making, those to whom
reports will be reported to and those who produce such reports. Such a scenario will
hold for all companies be it small, medium-sized or large companies as they do need
these said organizational structure to function and carry out their operations
effectively. In as much as these companies all use organizational structures, they will
differ from each other as each and every organization must be structured in a way that
best suits its needs and helps it achieve its success. As small companies develop into
larger ones, and as the large ones expand their operations globally, their
organizational structures must be adapted to fit their changing needs.
Organizations do need structuring and it is quite important for them to have
structuring such that lines of authority along with individual duties and
responsibilities can be understood by each and every member of the company. There
are, however, other important additional ways that these structures optimize the
operation as proposed by Orgplus; which is a consulting firm that deals with the
complexities and difficulties of organizational structuring and chart creation. These
other important ways could include the following:
Turning groups of individual members or employees in the organization to
teams and thus getting everyone geared and focused in the same direction
which is the achievement of the organization’s goals.
Orienting new employees to the ways of the company and providing them
organizational objectives, career and succession plans.
Understanding the complex nature of the structures that exist and helping to
simplify the relationships that exist within.
Empowering employees to understand the strategic vision and mission of the
company by clearly defining dependencies and relationships.
For the better understanding of the organization‟s structure, most organizations tend
to put in place a graphic presentation known as an organizational chart in which is
clearly spelt out the various areas (departments) of the organization, the roles they
play, their various lines of responsibility and authority, advisory roles as well as areas
of decision making. In effect these organizational charts enable employees at all
levels in the organization to immediately know their place in the organization, the
people to whom they are responsible as well as their own areas of responsibility.
According to Massimo, Lei there exists extensive knowledge on how organizational
structure affects the nature of businesses but it is essential to establish what part of
organizational structure really matters to the organization and what its main channel
of influence is. They further go to emphasize the fact that “There are two alternative
intuitions: on the one hand, the vertical chain of control provides the main
differentiating effect and on the other hand, it is the degree of different specialties
among the members that mostly matters. The vertical chain in this context refers to
the level of bureaucracy (which is an excessively complicated administrative
procedure in which most decisions are taken by mostly top officials) that exists within
the organization. The degree of specialization also matters as well.
“The fact that the
degree of specialization affects the ability to monitor and interferes with the
effectiveness of the hierarchy and the fact that vertical structure and specialties are
directly related suggest that any test of their role in the organization should account
for them jointly” (Massimo, Lei, p.4). As such it is essential to use a dataset on
vertical structure and specialization to jointly establish their role and impact on
When conceptualizing performance one has to differentiate between an action, that is,
the behavioral aspect of it and an outcome aspect of performance (Campbell, 1990).
The behavioral aspect will consist of what the employee does at the work place and
which should be beneficial to the organization and relevant to the organization’s
The outcome aspect of it relates to consequences or results produced by the
employee. “Performance is what the organization hires one to do, and do well”
(Campbell et al., 1993, p. 40). They further went on to say that “only actions which
can be scaled, that is, measured are considered to constitute performance”. Kaplan
and Norton (1992) developed the idea of a balanced score card (BSC) which was used
for measuring the performance of 12 companies in USA. The purpose of BSC was to
replace and make some changes on the traditional performance evaluation
frameworks, which primarily concentrated on financial aspect of measuring
performance in companies.
Thus it is essential to note here that not only the financial
aspect of performance measurement is being taken into consideration. Other aspects
include the customer which deals with the fact that organizations should be able to
benefit from their inherent and available resources; the internal business process
aspect which consists of the strategic activities carried out by the organization to meet
shareholders and customers‟ needs; and the growth aspect which relates to fact of the
organization being able to remain in continuous growth and innovation.
Kaplan and Norton (1992) explained that organizations had to focus on some goals
such as promotion of employee‟s capabilities and abilities, persuasion, information
system performance, and so on.
This aspect includes three main criteria including
employee continuity, employee satisfaction, and efficiency. Firms and organizations
must build performance evaluation indexes by these three criteria. Performance
indices need to be chosen unbiased and measurability be associated with
organizational objectives. Continuous performance is the objective of any
organization because it is only through performance that organizations are able to
grow and progress.
Therefore it will suffice to say that there is a close relationship
between organizational objectives which is channeled through the structure and the
concept of organizational performance.
1.2 Statement of Problem