The Effect of organizational structure on organizational performance in Cameroon: The Case of CDC
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This study assessed the effect of organizational structure on the overall performance of the Cameroon Development Corporation. An Organization is a wider concept which consists of organizational structure, organizational resources, and organizational procedures; thus this study had to focus on the aspects of internal communication and structure; employee satisfaction and performance; overall communication strategies, and how all these aspects affect organizational performance.
Primary data were gotten through the administration of 120 questionnaires to respondents. Secondary data from files, reports, and websites of the corporation was also used as a supplement to the primary data.
Pearson Product Moment Correlation was used to investigate the relationship between the dependent and independent variables. Based on the results, it was observed that there was a positive and statistically significant relationship between organizations performance and the internal structure of the organization suggesting that a well-designed organizational structure promotes success; the internal communication structure of the organization has a positive relationship with the overall performance of the organization, and an increasing level of employee satisfaction positively correlates with the performance of the organization.
From the study, the structure of every organization should be effectively designed such that it meets the needs of the organization, its employees as well as the external environment. Also, the structure should be elastic enough to accommodate growth and expansion opportunities as it arises.
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 are clearly spelled out and designated such that every employee knows and understands his or her job responsibilities. 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 structures 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.
For a 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 spelled 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 most 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 organizational performance.
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 workplace and which should be beneficial to the organization and relevant to the organization’s goals.
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 scorecard (BSC) which was used for measuring the performance of 12 companies in the USA. The purpose of BSC was to replace and make some changes to the traditional performance evaluation frameworks, which primarily concentrated on the 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 the 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 is 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
An appropriate structure is a contingent upon both the type of work to be performed as well as the environment in which the organization conducts business (Bolman & Deal, 1997). The type of organizational structure which an organization incorporates should be a function of the goals and objectives of that organization, thus it is very important for any organization to establish a structure that is appropriate and will suit every aspect of the organizations operations. Many problems do arise in an organization due to the fact it fails to put in place the appropriate structures required for the effective running of its operations and activities.
Different structures provide different strengths and weaknesses to the work to be performed and it is therefore important to find a structure suitable for the desired outcome on stability and predictability (Mintzberg, 1983). There has been a long-standing concern on a better understanding of how organizational structure affects organizational performance. This concern goes back at least to Cyert and March (1963, p.21), 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?” A more hierarchical structure, by lowering the incentives to collect soft information and to invest in geographically close assets – the ones more likely to provide superior performance (Chen et al., 2004) – effectively reduces performance. Therefore, the net effect is that more hierarchical structures should deliver worse performance.
From a general perspective, the idea that holds with respect to the main benefit of a diverse team is that “team members are able to provide different perspectives on important issues, which may reduce the probability of complacency in decision making…. Diversity may add value by bringing different perspectives, experiences and opinions to the table” (Adams and Ferreira, 2005).
Specialties should also improve cautiousness and help reduce managerial moral hazard as well as the incentives for managers to take the necessary risk; more specialties, by making the decision process more complicated, may reduce managerial moral hazard and risk-taking.
This effect is compounded by the lower incentives due to the lack of attribution of performance to the individual managers and thus may negatively affect performance, (Massimo, Lei; 2007). They further go on to say that a more hierarchical structure characterized by a variety of specialties would instead allow better control of managerial behavior and eventually enhance performance.
Organizations just like their structures are influenced by many factors such as size, technology, the working as well as an external environment which comes from their dynamic surrounding or from the organization itself which may cause them to choose a particular organizational structure based on some economic impositions or other constraints.
Due to the static nature of organizational structure, it sometimes cannot meet requirements of efficiency and performance (Quangyen, Yezhuang; 2013). It is essential for organizational structure to provide a certain degree of specialization in the organization and also be able to guarantee coordinated effort. Thus as the organization grows there is the constant need to redefine its operations and adjust its structures to reflect the various changes that will occur.
In a rapidly changing environment, organizational structures are bound to be flexible because to stay current and meet challenges of competition the organizations are bound to restructure as such changes are bound to affect its performances.
Focusing on organizational structure as the performance initiator provides a means to address performance issues from a system perspective rather than from an individual perspective. Thus this study will focus on answering the following questions:
What is the relationship between the organizational structure and the performance of the organization?
What determines the basis of the organizational structure that has been put in place by the Cameroon Development Corporation?
1.3 Objectives of Study
1.3.1 Main Objective
The goal of this study is to assess the effect of organizational structure on the performance of the organization with the Cameroon Development Corporation (CDC) as a case study.
1.3.2 Specific Objectives
The specifics objectives are;
To determine the factors that influence the organizational structure of CDC.
To assess the effect of the current organizational structure on the performance of CDC.
To make recommendations based on the findings of the study.