ABSTRACT
The study aimed to evaluate the effects of organizational structure on employee performance in Guinness Nigeria Plc and Nigeria Bottling Company, Plc, Ikeja, Lagos State, Nigeria. Five (5) specific objectives and five (5) research questions were formulated in this study to provide guidance to the study. The study employed descriptive research design to evaluate the effects of organizational structure on employee performance in the brewery firms. The population of the study is 6000 being the total staff strength of the (2) brewery firms in Nigeria stock exchange from 2011-2018 while the sample size was 375 extracted from the population using Taro Yamane method. The instrument for the study was a structured questionnaire. Data obtained were analyzed using a descriptive type of survey design such as frequency counts, percentages, and mean scores in line with the specific objectives while ordinary least squares (OLS) simple regression analysis technique were employed in testing the hypothesis of the study. The result of the study showed that work specialization on the quality service in Guinness Nigeria Plc and Nigeria Bottling Company, Plc can never be overemphasized. The findings of the study suggest that work specialization has a significant and positive effect on the quality of service and the main responses were all above the benchmark of 3.00. The research hypothesis testing done using ordinary least squares (OLS) simple regression analytical technique showed that departmentalization on training hours of employees, chain of command on revenue per employee, centralization on profit per employee and formalization on employee turnover significantly (at p< 0.05) and positively influenced employee performance at both Guinness Nigeria Plc and Nigeria Bottling Company, Plc. In view of the above findings, the study concludes that adopting appropriate structure is the fulcrum on which employee performance of brewery firms revolves. The study therefore recommend among others that Nigeria Brewery firms should give more serious attention in designing an appropriate structure that must match all departments, units and component parts of organization to facilitate employee performance at both GN Plc and NBC Plc.
TABLE OF CONTENTS
Title
Page i
Declaration ii
Certification iii
Dedication iv
Acknowledgements v
Table
of Contents vi
List
of Tables xii
List
of Figures xiii
Abstract
xiv
CHAPTER 1:
INTRODUCTION
1.1
Background to the Study 1
1.2
Statement of the Problem 4
1.3
Objectives of the Study 6
1.4
Research Questions 6
1.5
Research Hypotheses 7
1.6
Significance of the Study 7
1.7
Scope/ Limitations of the
Study 8
1.8
Limitations of the Study 9
1.9
Operational Definition of
Terms 10
CHAPTER 2: REVIEW OF
RELATED LITERATURE
2.0 Introduction 12
2.1 Conceptual Review 12
2.1.1 Organizational Structure 12
2.1.2 Model and Theories of Organizational
Structure 15
2.1.3 Dimensions of Organizational Structure 18
2.1.4. Nature of Organizational Structure 19
2.1.5 Types of Organizational Structure 20
2.1.6 Indicators of Organizational Structure 23
2.1.6.1
Advantages of Work Specialization 24
2.1.6.2
Disadvantages of Work Specialization 25
2.1.7 Departmentalization 25
2.1.7.1 Types of
Departmentalization 26
2.1.8 Chain of Command 27
2.1.8.1
Chain of Command Formation 27
2.1.8.2 Reporting relationships and organizational
chart 27
2.1.9 Formalization 28
2.1.9.1
Stage of formalization 30
2.1.9.2
Measurement of Level of Formalization 31
2.1.10 Centralization 31
2.1.10.1
Advantages of Centralization 32
2.1.10.2
Disadvantages of Centralization 33
2.1.11
Indicators of Employee Performance 35
2.1.11.1
Different types of Employee Turnover 37
2.1.11.2 Causes of Employee Turnover 37
2.1.12 Revenue per Employee 38
2.1.12.1
How Revenue per Employee Works 38
2.1.13 Profit Per Employee 39
2.1.14
Organizational Chart 40
2.1.15 the
Importance of Good Organizational Structure 40
2.1.16
Consequences of Structural Deficiencies 41
2.1.17. Method
of Grouping Department in an Organization 42
2.1.18
Types of Organization 44
2.1.18.1 Formal Organization 44
2.1.18.2
Informal Organization 45
2.1.18.3 Private
and Public Sector Organization 46
2.1.18.4 Private Enterprise Organization 46
2.1.18.5 Public Sector Organization 47
2.1.19
Functions of Informal Organization 47
2.1.20
Preview of Organizational Structure / Chart 48
2.1.21 Other important roles of organizational
chart 48
2.1.22 Forms of Organizational Structure / Chart 48
2.1.23 Merits of organization Chart 49
2.1.24 Demerits of Organization Chart 50
2.1.25 Organizational Structures and its Effect on
Employee Performance 50
2.1.26 Organizational Structure and Employee
Performance Framework 52
2.1.27 Employee Performance 55
2.1.28 The Role of Organizational Structure and
Employee Performance
in Organization 57
2.1.29 Concept of Organizational Performance 59
2.1.30
Importance of Cost on Staffing 61
2.1. 31
Crucial Issues of Organizational Structure 62
2.1.32
Impact of Organizational Structure on Coordination and cooperation 63
2.1.33
The Impact of a Flat Structure on Organizational Performance 64
2.1.34
The Impact of Span of Control
on Organizational Performance 66
2.1.35
Inception of Authority on Organizational Structure and Performance 68
2.1.36 Benefit of Empowerment 70
2.1.37
Delegation of Authority 70
2.1.38
Barriers to Delegation of Authority 72
2.1.39
Overcoming Barriers to Delegation of Authority 73
2.1.40 Line and Staff Authority 73
2.1.41
Centralization 74
2.1.42 Decentralization 75
2.1.43 Advantages of Decentralization 76
2.1.44 Decentralization: A Panacea for Employee
Performance 76
2.1.45 Type of Decentralization 77
2.1.46
Decentralization and Effective Decision Making 80
2.1.47 The Impact of Decentralization on
Organizational Performance 81
2.2 Empirical Review 83
2.3 Summary of Related Literature Review 88
2.4 Gap In Literature 89
2.5 Theoretical Framework 90
2.5.1 Hierarchy-community Phenotype Model of
Organizational Structure 90
2.5.2
Chester Barnard’s Model on Structure 91
2.5.3
Meier and Bothte’s Model of Span of Control 91
2.5.4 Hatch’s Model of Decentralization 92
CHAPTER 3: RESEARCH
METHODOLOGY
3.1
Research Design 100
3.2
Population of the Study 100
3.3
Sources of Data 101
3.4
Sample and Sampling Procedure 101
3.4.1
Sample size determination 102
3.5
Validity of the Research Instrument 105
3.6 Reliability
of the Research Instrument 105
3.7
Method of Data Analysis 106
3.8
Model Specification 110
CHAPTER 4: DATA PRESENTATION AND ANALYSIS
4.1
Data Presentation 114
4.2
Data Analysis 115
4.2.1
Personal Data of Respondents 115
4.2.1.1
Gender distribution of the Respondents 115
4.2.1.2
Age Distribution of Respondents 116
4.2.1.3. Educational Level 117
4.2.1.4
Marital Status 119
4.2.1.5 Position / Designation 120
4.2.1.6 Work Experience 121
4.2.2.1
Effects of work specialization on the quality of services in GN and NBC 122
4.2.2.2: Effects of departmentalization on training
hours of employees in
GN and NBC 124
4.2.2.3 Effects of chain of command on revenue per
employee in GN and NBC 126
4.2.2.4
Effects of centralization on profit per employee in GN and NBC 128
4.2.2.5
Effects of formalization on employee turnover in GN and NBC. 130
4.3 Testing
of Hypotheses 131
4.3.1 Hypothesis
1 132
4.3.2 Hypothesis
2 135
4.3.3 Hypothesis
3 138
4.3.4 Hypothesis
4 141
4.3.5 Hypothesis
5 144
4.4 Discussion of Findings 147
CHAPTER
5: SUMMARY, CONCLUSION AND
RECOMMENDATIONS
5.1 Summary
of Findings 151
5.2 Conclusion 152
5.3
Recommendations 153
5.4
Suggestions for Further Studies 155
REFERENCES 156 APPENDICES
LIST OF TABLES
3.2 Population Distribution Table 101
4.1 Distribution of questionnaires and
response rate 114
4.2 Gender distribution of the respondents 115
4.3 Age distribution of the respondent of GN
and NBC 116
4.4 Educational qualification distributing of
the respondents 117
4.5 Marital status distribution of the
respondents 119
4.6 Position / designation distribution of
the respondents 120
4.7 Work experience distribution of the
respondents 121
4.8 Effects
of work specialization on the quality of service in Guinness Nigeria
Plc
and Nigeria Bottling Company, Plc 122
4.9
Effects of departmentalization
on training hours of employees in GN and NBC 124
4.10 Effects
of chain of command on revenue per employee in GN and NBC 126
4.11 Effects of centralization on profit per
employee in GN and NBC 128
4.12
Effects of formalization on employee turnover in Guinness Nigeria Plc
and Nigeria Bottling Company, Plc. 130
4.13
Result of the ordinary least square (OLS) simple regression of the
effects
of work specialization on the quality of
service in Guinness Nigeria
Plc and Nigeria Bottling Company, Plc 132
4.14
Result of the ordinary least square (OLS) simple regression of the
effect of departmentalization on training
hours of employees in GN and NBC 135
4.15 Result
of the ordinary least square (OLS) simple regression of the effect of
chain
of command on revenue per employee in Guinness Nigeria Plc
and
Nigeria Bottling Company, Plc 138
4.16 Result
of the ordinary least square (OLS) simple regression of the effect of
centralization
on profit per employee in Guinness Nigeria Plc and
Nigeria
Bottling Company, Plc 141
4.17 Result
of the ordinary least square (OLS) simple regression of the effect of
formalization
on employee turnover in GN and NBC 144
LIST OF FIGURES
Figure 1: Organizational
chart as an example of formalization 30
Figure 2: Organizational
chart of brewery firm 42
Figure 3: Indicators
of organizational structure and employee performance 57
Figure 4:` Robbin’s
and Goldsmith’s organizational structure. 99
CHAPTER 1
INTRODUCTION
1.1
BACKGROUND
TO THE STUDY
The organizational structure of a company
is a system used to define its hierarchy. Each employee’s position is
identified, including their function and who they report to within the firm. It
is the way in which a company or organization is organized, including the types
of relationships that exist between the directors, managers and employees. The
organizational structure, which may refer to the hierarchy of not just a
business, but also any entity such as a charity, government department, agency
or education establishment, is developed to establish how an entity operates
and helps the organization in achieving its goals and objectives. The
organizational structure outlines how activities including task allocation,
supervision and coordination are directed towards its individual aims. It is
also a “viewing glass” or perspective through which employee’s may see their
organizations and their environments (Bock, 2013).
The success or failure of any organization
depends on amount of people efforts in the organization and especially
organization structure in order to achieve aims of firm that is possible by
efficient use of hardware and software resources (Bridges and Bridges, 2017).
In this regard ability of the management to motivate and create the desire to
work hard on employees has a major role, so management structure of
organization is mentioned as a vital link between management and staff. Because
of the organization principles, policies implementation, management structure
could be useful in the use of investments, efficient technology, advanced
methods of work, the methods of motivating human resources and so on in order
to improving productivity in organizations (Brandt and Agrawal, 2016).
Organizational structure is considered as
formal and rational distribution or jobs, responsibilities, powers and the way
of coordination and communication in order to achieve the main objectives of
any organization in its inception (Ramadani, 2012). Nelson and Quick (2011)
further posit that the organizations structure is meaningless unless supported
by appropriate system and a well-conceived culture. Martinelli (2011) argues
that the type of organization structure adopted by a firm will depend on the
nature of the particular organization in question; in addition, the form which
the organizational structure takes may be represented periodically by an
organizational chart. Ajagbe (2011) sees organizational structure as “how jobs
tasks are formally divided, grouped, and coordinated” the nature of
formalization is the degree to which the workers are provided with rules and
procedures that deprive versus encourage creative, autonomous work and
learning. In organizations with high formalization, there are explicit rules
which are likely to obstruct the impulsiveness and the flexibility needed for
growth. Centralization or rigid authority structure also creates a
non-participatory environment that reduces communication, commitment and
involvement with tasks among participants. It refers to hierarchical level that
has authority to make decision. If decisions are delegated to the lower levers,
the organization is decentralized, and if decision making power authority is
set aside at the top level, it is centralized.
Germain (2008) considers the outcome of
structure on the performance mediating supply chain management and found that
formal structure has a positive effect on performance in stable environment and
a negative effect is achieved in dynamic atmosphere. Employee performance
relates to how successfully an individual group of people with a particular
purpose perform a function. Essentially, this is what is meant by employee
performance and achievement of successful outcomes. The organizational
structure of an organization for this research is studied by looking at variables
such as formalization and centralization. The research will examine these
organizational structure variables in Guinness Nigeria Plc and Nigeria Bottling
Company, Plc, Ikeja, Lagos State, Nigeria.
Formalization is a set of rules, policies
that an organization has to follow. One advantage of formalization is that a
certain standard of performance is always guaranteed. Centralization is the
amount of authority higher level people in the hierarchy have over the business
processes. A highly centralized company will have complete control by the
higher authority and mostly all decisions will be made by the higher authority.
A decentralized organization is one in which lower levels can make decisions as
well.
There has been a lot of debate regarding
what is the right kind of structure, hence we will try to look at real life
cases and examine what is the right kind of organization structure required in
a dynamic environment especially in a brewing firm. (Liao, 2011). This study
develops a research framework that examines relationships among various
structural dimensions and employees performance in brewing industry in Nigeria.
Four aspects of organizational structure are considered; the number of layers
in hierarchy of the organization, the nature of formalization, the nature of
internal and external boundaries that exist in the organization and the nature
of technology (appropriate) adopted by the organization. The employee’s
performance is represented by supervisor’s rating, quality and quantity, goal
accomplishment, efficient and effective, dependable and enthusiastic, ability
and capability. Given the importance of structure to the performance survival,
and sustainability of companies and contributions of the brewing sector to the
economy, this research therefore deems it necessary to investigate whether
appropriate structure is a critical success factor for success of brewing firms
in Nigeria and extent it has helped in the performance of its employees. The
brewery firms have called for a well structured and conducive environment for
employees so as to retain intellectual and skilled employees in order to
achieve towards greater productivity. Therefore, this research is aimed to find
out the effects of organizational structure on employee performance in Guinness
Nigeria Plc and Nigeria Bottling Company, Plc, Ikeja, Lagos State. This is
necessary to identify how best the brewery firms like GNB and NBC can retain
competent employees.
1.2. STATEMENT OF THE PROBLEM
Business organization in an attempt to
adopt the best type of structure with the aim of attaining maximum performance
has faced a lot of problems. Also many organizational flaws can be related to
inappropriate structures chosen in order to reach a desired goal. An appropriate
structure is contingent upon both the type of work to be performed as well as
the environment in which the organization conducts business (Bolman and Deal,
1997). 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.
The problems associated with effects of
organizational structure on employee performance are significant issues and these
have generated opinions. Employees of Guinness Nigeria Plc and Nigeria Bottling
Company, Plc, Ikeja quit their present working place because of lack of proper
working environmental fixtures and these have gone a long way to affect the
productivity of such employees and invariably affected the turnover of the
organization.
The dissatisfaction of these employees on
their job have made them go looking for job in some other organization where
they think that better provisions are made for these variable lacking in their
former workplace. Moreover, because of improper positioning or location of
plant, building and machineries, the employees work under stress and
productivity adversely affected.
These problems encountered by business
organizations in choosing suitable forms of structure are complexities
associated with the recent shift from authoritarian to decentralized structures
stressing employee empowerment, inability of managers to identify the best form
of structure that should follow strategies adopted by their individual
organizations, inability of employees to adapt to existing and changing
structures and the difficulty in maintaining a stable structure as a result of
the ever changing business environment.
The brewing sector is faced with mixed
performance. Evidences from the subsector confirm that quite a number of
brewing firms are performing very poorly, in some cases, they go into
liquidation, while few others are performing excellently well using all known
performance indicators. For instance, Nigeria breweries and Guinness breweries
have been paying dividend to their shareholders consistently for the past
twenty years. Besides payment of dividend, almost all other performance
indicators have been on the positive trend. However, the excellent performances
of some brewery firms are still worrisome as about 70% of brewing firms went
under liquidation within the last twenty years. The essence of this study therefore
is to determine whether adopting appropriate structure is one of the critical
success factors that support those firms that are performing well in the sector
and the extent to which appropriate structure has helped the performance of its
employee. Also, studies have established that efficient and effective
performance depend on the designing and adoption of a fitting structure by the
organization, in other words, no effective and efficient organization if the
structure of the organization does not support the people who work within the
system that provide the key element to determine its success. Based on this,
the study looked at the effects of organizational structure on employee
performance in Guinness Nigeria Plc and Nigeria Bottling Plc, Ikeja, Lagos
State Nigeria.
1.3. OBJECTIVES OF THE STUDY
The broad objectives of the study is to
evaluate the effects of organizational structure on employee performance in Guinness
Nigeria Plc and Nigeria Bottling Plc, Ikeja, Lagos State Nigeria. The specific
objectives are to:
1.
examine the effect of
work specialization on the quality of services in Guinness Nigeria Plc and
Nigeria Bottling Company Plc, Ikeja.
2.
evaluate the effect of
departmentalization on training hours of employees in Guinness Nigeria Plc and
Nigeria Bottling Company Plc, Ikeja.
3.
determine the effect of
chain of command on revenue per employee in Guinness Nigeria Plc and Nigeria
Bottling Company Plc, Ikeja.
4.
examine the effect of
centralization on profit per employee in Guinness Nigeria Plc and Nigeria
Bottling Company Plc, Ikeja.
5.
determine the effect of
formalization on employee turnover in Guinness Nigeria Plc and Nigeria Bottling
Company Plc, Ikeja.
1.4 RESEARCH
QUESTIONS
1.
To what extent does work
specialization has an effect on the quality of services in Guinness Nigeria Plc
and Nigeria Bottling Company Plc, Ikeja?
2.
What is the effect of
departmentalization on training hours of employees in Guinness Nigeria Plc and
Nigeria Bottling Company Plc, Ikeja?
3.
To what extend does chain
of command has an effect on revenue per employee in Guinness Nigeria Plc and
Nigeria Bottling Company Plc, Ikeja?
4.
What is the effect of
centralization on profit per employee in Guinness Nigeria Plc and Nigeria
Bottling Company Plc, Ikeja?
5.
What is the effect of
formalization on employee turnover in Guinness Nigeria Plc and Nigeria Bottling
Company Plc, Ikeja?
1.5 RESEARCH HYPOTHESES
Based on the study, the following hypotheses
were formulated to guide this study
H01: Work specialization has no significant
effect on the quality of services in Guinness Nigeria Plc and Nigeria Bottling
Company Plc, Ikeja.
H02: Departmentalization has no significant
effect on the training hours of employees in Guinness Nigeria Plc and Nigeria
Bottling Company Plc, Ikeja.
H03: Level of chain of command has no
significant effect on revenue per employee in Guinness Nigeria Plc and Nigeria
Bottling Company Plc, Ikeja.
H04; Centralization has no significant effect
on the aspect of profit per employee in Guinness Nigeria Plc and Nigeria
Bottling Company Plc, Ikeja.
H05: Formalization has no significant effect
that influence employee turnover in Guinness Nigeria Plc and Nigeria Bottling
Company Plc, Ikeja.
1.6. SIGNIFICANCE OF THE STUDY
This study will provide organizational
policy makers and professionals with a new approach to developing a better
organizational structure for improved performance. They need to be conscious
about span of control, culture, division of labour and specialization,
authority and delegation is so important to the organization and as such its
importance in the growth of the organization is vital especially at these times
when Nigeria Brewery is under the spotlight as a result of the recent
globalization in the world.
The study will also be of help to the
organization in repositioning things for improved performance especially as it
concerns the relationship between management and employee. It will thus assist
stakeholders to be aware of the importance of organizational structures in
ensuring industrial peace and harmony. A dysfunction structure leads to role
conflict which affects the employee performance as well as increase in
disharmony alongside with authority in the organization. And it would also help
the target population i.e. Guinness Nigeria Plc and Nigeria Bottling Company Plc
to improve their organizational polices and HRM practices through
recommendations and suggestions.
Theoretically, the study is expected to
bridge the gap in the literature on the effects of organizational structure on
employee performance in Guinness Nigeria Plc and Nigeria Bottling Company, Plc.
Also, the study will add to the existing literature on how organizational
structure will enhance employee’s performance in organizations and related
concepts. The study will provide an additional framework in the identification
and solutions to the challenges facing organizational structure on employee’s
performance in Guinness Nigeria Plc and Nigeria Bottling Company, Plc.
1.7. SCOPE/ LIMITATIONS OF THE STUDY
The research work is mainly concerned with
the effects of organizational structure on employee performance in Guinness
Nigeria Plc and Nigeria Bottling Company Plc, Ikeja, Lagos State Nigeria from
2011-2018 and the scope of this research will be categorized into three
namely:-
·
Unit
scope
The unit scope is on employees of Guinness
Nigeria Plc and Nigeria Bottling Company Plc, Ikeja, Lagos State Nigeria with
the intentions to harness the organizational structure elements which are the
explanatory variables i.e work specialization, departmentalization,
centralization and decentralization in relation to employee performance.
·
Content
scope
The content of this study covers organizational
structure and employees performance including the indicators of both variables,
empirical review and theoretical framework.
·
Geographical
scope
The study will be carried out at Guinness
Nigeria Plc, Ogba, Ikeja L.G.A and Nigeria Bottling Company Plc, at No 1 Nbc
plant lateef Jakande Road, Agidingbi, Ikeja L. G.A both of Lagos State Nigeria.
1.8 LIMITATIONS OF THE STUDY
The greatest limitation of the study is
having access to the office as the environment were highly restricted because
of security reasons and entrance into the brewery firm were mainly on
invitation. Thus securing an invitation to share the questionnaire and conduct
interviews were very difficult and there were restrictions on number of times I
was permitted to have access to the offices where required information were
gathered. Executive, non-executive and even the lower level management staff of
Guinness Nigeria Plc and Nigeria Bottling Company, Plc that were part of the
unit scope of the study were also difficult to reach because of the distance
and diverse locations involved. Thus, many of them were reached via email and
their replies did not come with ease, many of the executive and non-executive
were written on many occasions before they completed the questionnaire mailed
to them due to the time spent in completing the study. Generally, obtaining
required information apart from secondary data sourced from the firms’
statistical bulletin, annual reports and magazines were the major constraint
encountered in completing the study.
1.9 OPERATIONAL DEFINITION OF TERMS
Organization:
It is an entity comprising multiple
people, such as an institution or an association, who has collective goals and
is linked to an external environments.
Structure:
This is an arrangement and organization of
interrelated elements in material object or system so organized.
Organizational
structure: This is defined as how job tasks are
formally divided, grouped, and coordinated. The key elements of organizational
structure include; work specialization departmentalization, chain of command
span of control, formulization, centralization and decentralization.
Employees:
These are group of people who work
together in a particular companies or firms with a mutual understanding to
achieve the organizational goals, and also for them to earn a living.
Performance:
It simply
means the production of valid results as a result of valid inputs by the
employees in an organization, also on the management as a whole.
Employee
performance: It can be defined as the employee’s
ability to accomplish its aims using the resources he/she has in a properly
structured manner. Employee can also be defined by the extent at which the
employee is effective in executing its strategies.
Work
specialization: Is
the degree to which organizational activities are subdivided into separate jobs
(individual specializes in doing part of an activity rather than the entire
job). It also refers to division of work.
Departmentalization:
This involves dividing an organization into different department, which perform
tasks according to the departments’ specializations in the organization and can
be found in both public and private sector.
Centralization: Can be defined as a hierarchy decision making
structure where all decisions and processes are handled strictly at the top or
the executive level. Policies are put in place to ensure the rest of the
company follows the direction of the executive.
Decentralization:
Refers to decision making at lower levels in the hierarchy of authority. In
contrast, decision making in a centralized type of organizational structure is
at higher levels.
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