ORGANIZATIONAL STRUCTURE AND CORPORATE PERFORMANCE A STUDY OF SELECTED FIRMS IN PORT HARCOURT

ABSTRACT

The  business environment today  has  become dynamic that  the decision to structure or restructure an organization has become pressingly significant.     There has been some serious economic/financial sector reforms in Nigeria due to the fact that performance in the manufacturing and service (banks) firms were not  effective  and  efficient.     It  is  believed  that  organizational structure can bring about corporate performance.   Based on the above fact the need for this study existed. It was necessary to study the organization structure of Nigerian firms, to identify the structural patterns, extent of performance of the characteristics and practices.   A sample size of ten firms was selected from the manufacturing/service (banks) firms using the convenient sampling technique.   Primary data was generated through the use of questionnaire administered on the management staff and supervisors of  the selected firms.    Statistical tools employed in organizing and analyzing the data were descriptive and inferential. Descriptive statistical tool include frequency, mean of means and weighted average while  inferential techniques was  the  T-test  in testing relationship. Among the findings were, the most frequent type of structure used in Nigerian firms is the financial structure. Performance is more achieved with the functional structure than other structures.  Service firms are mostly mechanistic in practice while manufacturing firms are more of organic in nature. Professionalism in organizational structure has a relationship with organizational democracy. The main conclusion of the study is that there is no universal best way to design an organization. Organization structures are influenced by the stages of development in  terms  of  technology, market and volume of  product/services among others.   The study recommends that organizations must learn to understand the movements in growth, the forces that shape it to bring about creativity, efficiency and overall performance.

CHAPTER ONE INTRODUCTION

1.1  BACKGROUND OF THE STUDY

The business environment today has become so dynamic that the decision to structure or restructure an organization has become paramount. When certain manifestation become effectually significant, top management contemplate creating a structure to suit the organization’s demands in order to effectively and efficiently achieved its stated objectives.

The manufacturing and banking firms in the business world today need organization structures to direct the levels of authority and  responsibilities, information  channel  and  equally  establish, primary control units to bring about corporate performances, as they move from one stage     to another in terms of growth size, technology, market, product line, merger and acquisition. Tidd (2004:4) state that performance lies in the ability of today’s managers to understand how each of the sub-units such as job, positions, activities and systems develop and the interaction with one   another   should   form   an   organic   whole   in   any   given organization. Scholars in particular and management practitioners

in general are beginning to be worried about the situation and there is the need to investigate into the extent of performance of most of the firms in Nigeria.

Previous researchers on organization structure or design like Ottih   (2004),  Allison  (1984),  Payne  (1981)   Mintzbery  (1979) Galbraith (197), Cummings and Worley (1992), Duncan (1972) Emery and Trist (1965) Terryberry (1968) Thompson (1967), Burns and stalker (1961), Lawrence and Horsch (1967) Wieck (1969) Woodward (1960), Hicks, Pugh and associates (1969) mills and associates (1980) Aston group (1960) Blam and associates, (1980) Aston groups (1960) and Associates Chandler (1960), Child (1972) and Fubara (1984) but their basic study on   structure were structure support mechanism, environment, technology, size, strategy, power and politics and finally the total contingency paradigm

Fubara’s (1984) study was based on state owned enterprises in developing countries.   According to him, such firms dominate developing economics and that compels him to inquire into their efficiency and effectiveness. In probing into the strategies decision processed  behind  the  often  dismal  performance of  these  firms,

Fubara (2004:120) found that decision processed are influenced by power gains from within and outside the firms.   These political powers influences the structure and  this raises questions such as legitimacy of purpose and objectives of the organization, appointments are not made on merit bases hence they influences corporate   decision  and   thirdly,   the   power   games   negatively influence the already misconceived corporate shared values Ottin (2004:73). The pertinent question to ask is, do Nigerian firms have nay structural patterns? If yes, how are they effective and efficient and what are the necessary causes of poor performance.

According to  Ottin  (2004:23) “organizational structure  is  a framework of roles, responsibilities, authority and communications relationship that are carefully designed to achieve the performances of an organizational task and achieve its objectives.” That means that any manager must adhere to the following design components such as technology, structure, measurement system, human resources system and culture and not power game, if high performance is to be achieved in our firms.  Cummings and Worley (1992:126) on the basis of performance these design components are briefly discussed for clarification.

Technology:   This centres on how organization can convert raw materials  into  products  and  services.  The  core  transformation function such as production methods, work flows and equipment Structure: the ways an organization should divide its labour or differentiates its parts into horizontal department and groups and vertical into managerial hierarchies

Measurement System: Simply the methods of gathering assessing and disseminating information on the activities of groups and individuals  in  the  organization  such  as  management  control systems and performance appraisal systems.

Human Resources System: The mechanisms that will enable the selection, training and development of its employees such as reward system.

Culture: This concerns the basic assumptions, values and norms shared by the organizational members. These elements will serve to guide the members perceptions, thought and actions. The point emphasized here is that the ability of the management adherence to these components has a positive effect on the organizations performance.

Other factors that could affect performance are the external and internal forces as well as the style of management approach to structuring the organization.

The background profile identifies factors responsible for the performance of our firms through their organizational structures. Why is it that some firms perform poorly irrespective of their organization structure? Could it be that most managers or management to do follow seriously their structures or could it be that the employees are responsible for poor performance? What structural patterns do Nigerian firms currently operate and can these structures being about or increase corporate performance? It is against this background that he study is undertaken to investigate firms organizational structures in relation to corporate performance, using manufacturing and services firms “banks” as the object of interest.

1.2  STATEMENT OF THE PROBLEMS

The fact that organization’s needs to have structure cannot be over emphasized. It is a vital tool for directing the overall activities and performance of organizational tasks that should enhance corporate performance.

This is a problem and calls for investigation. The study suggests management inability to adhere to design components as a factor responsible for performance and carried out an empirical investigation  into  the  relationship  between  decentralization and production efficiency and organizational democracy, and organizational performance. The aspect of  structure investigated were the extent of practice of the structural characteristics  as well as the extent of performance in the areas of performance such as profitability efficiency of work, ability to make good decision etc.

1.3  OBJECTIVE OF THE STUDY

This study is designed to do the following:-

(1)    To find out the current structural patterns adopted by firms in Nigeria

(2)    To  investigate  the  extent  of  practices  of  the  structural characteristics of the firms

(3)    To   measure   their   performance   in   areas,   such   as profitability, efficiency of work etc.

1.4  RESEARCH QUESTION

The background profile suggested the following questions for investigation to enable us achieve the objective of the study.

(1)    What structural patterns are adopted by the Nigerian firms? (2)    What are the characteristics of these structural patterns?

(3)    To what extent are these structures efficient and effective?

1.5    RESEARCH HYPOTHESIS

The  study  is  designed  to  verify  the  following  research proposition.

Hypothesis I

H0:   There   is   no   relationship   between   decentralization   and production efficiency

H1:   There   is   a   relationship   between   decentralization   and production efficiency.

Hypothesis II

H0:   There     is     no     relationship     between     organizational democracy and organizational performance.

H1:   There is a relationship between organizational democracy and organizational performance.

1.6  SIGNIFICANCE OF THE STUDY

All business entity is expected to grow in strength and remain in the competitive environment. But these entities performance has been a thing of concern to many. Several attempts and effort have been made to improve the performance of these firms from the government reforms and researchers.  However, there had been no substantial improvement on the performance. Perhaps, government and company’s effort to improve performance were adopted in the wrong manner.   This calls for the research to identify the actual factors that account for performance

If the organizational structure is an important tool that should bring about performance in firms, then managers, practitioners and scholar should develop and adopt the right structural patterns that will ensure effective and efficiency to the organization. This research will serves as a references piece to other researchers and scholars.

1.7   SCOPE OF THE STUDY

This study was restricted to ten (10) corporate organization. This are five services (banks) firms and five (5) manufacturing firms in port Harcourt to ascertain whether the organizational structures of these firms can bring about corporate performance.

1.8  LIMITATION OF THE STUDY

The greatest limitation encountered in the work was basically time, money, the respondents fear and refusals to freely give out their organogram with the pretext of indulging secret.

1.9  DEFINITION OF TERMS

To ensure a better understanding of this research, definition of the following terms as used in the work are given below Organizational structure: The framework of formal relationship that have been established in an organization through the process of   organizing.      It   involves  the   establishment  of   the   rules, regulations,   procedures,   the   employment   and   utilization   of specialist.

Complexity: the nature of differentiation of activities or function. It indicates the degree of difficulty in the execution of tasks without expert knowledge.

Organization Design: the choices about the strategies, structures and processed that would be used to produce efficiency and performances.

Prevalence of Written Rules and Procedures: the extent to which activities are co-ordinate by plan rather than by feedback ie. The intensity of the use of rules policies and procedures

Intensity: the extent to which organizational use large number of administrative and  staff  personnel  to  achieve  any  on-going  co- ordination of activities in the organization.

Structure:  the way an organization divides labour or differentiate its parts horizontally into department and groups and vertically into managerial hierarchies.

Culture: these are basic assumptions, values and norms shared by the organizational members to make corporate performance tick. Diagnosis:  the  process  of   assessing  the  functioning  of   the organization, department and tasks to discover certain sources of problem  areas  for  possible  improvement  from  the  structure  or design.

Resource scarcity: the availability to the organization’s essential resources such as raw materials human resources and capital.

Self-contained units: the fundamental different way of organizing popularly     called  product  or  divisional  structures  in  which

organizational  activities  are  groups  on  the  basis  of  product, services, customers or geographic

Democracy: the level of decision making in the organization. The employer and employee decision making process.

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