ABSTRACT
This study examines the effect of structure on organisational performance of Nigerian commercial banks. Organisational design is the choice of appropriate structure for the organisation. Some corporate managers often do not critically align the structure of the firm with its nature and scope. This non- alignment makes the mechanism for corporate effort and desired organisational performance difficult to be actualized. Also, the functions of the formal structure and activities often exist independently of the members of the organizations who carry out the work. However personalities are an important part of the working of the organisation. In practice the actual operation of the organisation and success in meeting its objectives will depend upon the behaviour of people who work with the structure and who give direction, shape and personality to the organizations’ framework. Therefore, when the human elements are not organized in layers in terms of the structure, the organisation will live in a state of anarchy, thus affecting efficiency. This will eventually lead to low productivity hence low profitability. Thus, it is against these backgrounds that this study sought to evaluate the relationship between structure and organisational efficiency of Nigerian Commercial banks; evaluate the role of structure on cost efficiency of Nigerian Commercial banks and determine the role of structure on job satisfaction of Nigerian Commercial banks’ employees. This study used the survey research design and the respondents were drawn from fifteen commercial banks in Enugu state. The sample size consisted of five hundred and forty-three (543) managerial and non-managerial staff of the commercial banks in Enugu state and data collection was by questionnaire structured in five (5) point likert-scale. The reliability test was by Pearson Moment correlation at 0.82. The data were presented and analysed using percentages. The study reveals that the perception of managerial and non- managerial staff of commercial banks in Enugu state indicates that there was a positive relationship between structure and organisational efficiency of Nigerian commercial banks (correlation coefficient (R) = 0.935). The perception of managerial staff of banks in Enugu State indicates that structure had a significant positive effect in the enhancement of performance of Commercial Banks in Nigeria (Cal X2 = 175.80 > Tab X2 = 9.48). The perception of non-managerial staff of commercial banks in Enugu state reveals that structure had a significant positive effect in the enhancement of performance of Commercial Banks in Nigeria (Cal X2 = 192.64 < Tab X2 = 9.48). The result again reveals that the perception of managerial staff of banks in Enugu State indicates that structure of Nigerian Banks had a significant positive effect on job satisfaction of Nigerian Commercial bank workers (Cal X2 = 36.40 > Tab X2 = 9.48). Also the perception of non-managerial staff of commercial banks in Enugu state indicates that Structure of Nigerian Banks has significant positive effect on job satisfaction of Nigerian Commercial bank workers (Cal X2 = 132.49 < Tab X2 = 9.48). The study therefore recommends amongst other recommendations that since good structure have positive and significant effects on job satisfaction of commercial bank employees, structure should be decentralized to the greatest extent possible to enhance innovation and increased satisfaction of their employees.
TABLE OF CONTENTS
Title Page. . . . . . . . . i
Certification. . . . . . . . . . ii
Approval. . . . . . . . . iii
Dedication. . . . . . . . . iv
Acknowledgments. . . . . . . . v
Abstract. . . . . . . . . vi
List of Tables. . . . . . . . . x
List of Appendix. . . . . . . xii
Chapter One Introduction. . . . . . 1
- Background of the Study. . .
- Statement of the Problem. . . . . . 4
1.3 Objectives of the Study. . . . . . 5
1.4 Research Questions. . . . . . . . 6
1.5 Research Hypotheses. . . . . . . 6
1.6 Significance of the Study. . . . . . 6
1.7 Scope of the Study. . . . . . . 7
1.8 Operational Definition of Terms. . . . . 7
1.9 Brief Profile of Selected Nigerian Banks. . . . 8
References. . . . . . . 15
Chapter Two Review Of Related Literature. . . 18
2.1 Conceptual Framework. . . . . . 18
2.2 Theoretical Framework . . . . . 19
2.2.1 Organizational Structures and Design. . . . 19
2.2.2 Principles of Organization Structure. . . . . 19
2.2.3 Type of Organizational Structure. . . . . 24
2.2.4 Overview of Organizational Structure and Performance . 27
2.2.5 Theories of Organisational Structures. . . . . 31
2.2.6 Organizational Structure as a Determinant of Performance . 33
2.2.7 Organizational Complexity and Organizational Performance. . 38
2.2.8 Organisational Structures and Business Processes. . . 45
2.2.9 The Link between Organizational Culture and Corporate Performance. . 48
2.2.10 Organisational Structure of Banking Supervision. . . 51
2.3 Empirical Framework . . . . . . 55
2.3.1 Structure and Organisational Performance. . 55
2.3.2 Organisational Structure and Performance. . . . 60
2.3.3 Structure and Employee Job Satisfaction. . . . 64
2.4 Summary of Literature. . . . . . 66
References. . . . . . . 68
Chapter Three Research Methodology. . . . 86
3.1 Research Design. . . . . . . 86
3.2 Nature and Sources of Data. . . . . . . 86
3.3 Research Instrument. . . . . . . . 86
3.4 Population of the Study. . . . . . . 87
3.5 Sample Size Determination. . . . . . 87
3.6 Validity of the Instrument. . . . . . 88
3.7 The Reliability of the Instrument. . . . . 88
3.8 Techniques of Data Analysis. . . . . . 89
References. . . . . . . . 90
Chapter Four Presentation and Analysis of Data. . . 91
4.1 Presentation of Data. . . . . . . 91
4.2 Test of Hypotheses. . . . . . . 103
4.2.1 Test of Hypothesis One. . . . . . 103
4.2.2 Test of Hypothesis Two. . . . . . 105
4.2.3 Test of Hypothesis Three. . . . . . 106
4.3 Discussion of Results. . . . . . . 108
Chapter Five Summary of Findings, Conclusion and Recommendations
5.1 Summary of Findings. . . . . . 110
5.2 Conclusions. . . . . . . . 110
5.3 Recommendations. . . . . . . 112
5.4 Contribution to Knowledge. . . . 113
5.5 Recommendations for Further Studies. . . . 114
References. . . . . . . . 115
Appendix. . . . . . . . 116
Bibliography. . . . . . . . 123
LIST OF TABLES
Table 3.1 List of Banks and Population of Bank Staff in Enugu Metropolis. . 87
Table 3.2 Reliability Test. . . . . 88
Table 4.1 Response Rate of Commercial Bank Staff in Enugu State. . . 91
Table 4.2 To What Extent does the Structure of your Organisation
Have an effect on your Bank’s Operation?. . . 92
Table 4.3 To What Extent do you think that information in your
Organisation is Easily Processed?. . . 93
Table 4.4 To what extent do you think that information screening
Biases are there in your organisation?. . . 94
Table 4.5 How do hierarchical groups make decisions in your organisation?. . 94
Table 4.6: To what extent do you think that the hierarchical process in
Your organisation affects how customers are attended to?. . . 95
Table 4.7 To what extent do you think that the structure put in place by
Management make customers of your bank complain about services rendered by your bank?. . . . 96
Table 4.8 To what extent does staff leave your organisational as a result of complain of the chain of command?. . . . 97
Table 4.9 To what extent do you think that the performance of your
organisation depends on chain of command?. . . 98
Table 4.10 To what extent do you think that the chain of command affects the desire of staff to perform on the job?. . 99
Table 4.11 Do you think that the stages through which information are
processed in your organisation affect your bank’s ability to
attract and retains customers?. . . . 99
Table 4.12 To what extent do think that staff is regularly promoted in your organisation?. . . . . . 100
Table 4.13 To what extent do you think that the chain of command
in your organisation affects the processes of training and
development in your bank?. . . . . 101
Table 4.14 To what extent do you think that the design of your bank’s
structure enhances the minimization of administrative cost in
operations?. . . . . . . 102
Table 4.15 Consolidated responses from tables 4.2, 4.6 and 4.9. . . . 103
Table 4.16 SPSS Pearson Moment Correlation results for hypothesis one. . 104
Table 4.17 Structure and Cost Efficiency of Nigerian Banks. . . . 105
Table 4.18 SPSS Chi-Square result for hypothesis two. . . . . 105
Table 4.19 Consolidated responses from tables 4.8, 4.10, 4.12 and 4.13. . 106
Table 4.20 SPSS Chi-Square result for hypothesis three. . . . . 107
LIST OF APPENDIXES
Appendix A Letter Of Respondent. . . . . . 116
Appendix B Questionnaire. . . . . . . 117
Appendix C SPSS Results of Hypotheses. . . . . 120
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The term organization has been defined in several ways. Leavitt (1962:55-70) defines it as a specific configuration of structure, people, task and techniques. Structure describes the form of departments, hierarchy and committees. It influences the organization’s efficiency and effectiveness and thus organizational structure refers to the institutional arrangements and mechanisms for mobilizing human, physical, financial and information resources at all levels of the system (Sachdeva, 1990:14).
There is a long standing concern that strategic literature needs a better understanding of how organizational structure and decision-making affect organizational performance. This concern goes back at least to Cyert and March (1963:45), 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?” But with a few exceptions, questions of this sort remain mostly unexplored (Rumelt et al., 1994:78). This lack of knowledge regarding how decision making structure affects organizational performance continually resurfaces in different areas of management, for example, in the context of ambidextrous organizations, Raisch and Birkinshaw (2008:375-409) note that far less research has traditionally been devoted to how organizations achieve organizational ambidexterity. These observations are congruent with the view that organization design is the field that is specifically devoted to studying the linkages between environment, organizational structure, and organizational outcomes, however despite management long history, it is in many respects an emerging field of study (Daft and Lewin, 1993:1-6; Zenger and Hesterly, 1997:209-222; Foss, 2003:331-349).
The modern interest in organizational structure as a pattern of communications among individuals can be traced back to Graicunas’ paper on the use of graphs to understand span of control, published as a chapter on Gulick and Urwick (1937:71). Simon’s (1947/1997:56) more elaborate view of organizations as information-processing devices composed of boundedly rational individuals, led him to make span of control contingent on contextual factors, and later to extend the work of Bavelas (1950:723-730) and Leavitt (1951:55-70) to determine how effective were different information processing structures at completing organization-level goals (Guetzkow and Simon, 1955:233-250). Subsequently, the role of organizational structure took a central place in the Behavioral Theory of the Firm (Cyert and March, 1963:78). However, with one exception (Cohen et al., 1972:1-25), the Carnegie tradition devoted most of its energies to decision-making in the absence of organizational structure concerns. In fact, in a recent article, Gavetti, Levinthal, and Ocasio (2007:523-536) call organizational structure a “forgotten pillar” of this tradition.
Two management theories have tried to explain the role of structure in achieving the goals of the organization; these are the contingency and team theories. Contingency theory (Woodward, 1965:71; Lawrence and Lorsch, 1967:21) shared the Carnegie tradition sensibility on the issue and highlighted the role of information-processing constraints. Contingency theory also extended that sensibility by delving into the linkages between the environment and the organization, and seeks to find the patterns of organizational structure such as formalization and administrative intensity that are typically associated, or have the best ‘fit,’ with contextual factors such as size and technological uncertainty. Most of this literature has not dealt with individuals as the level of analysis nor with establishing the processes that connect context to structure (Meyer et al., 1993:1175-1195).
The Team theory (Marschak and Radner, 1972:192) took a formal and information-theoretic approach to organizations, by mathematically modeling the effects of information decentralization (i.e., not all team members have access to the same information) under perfect alignment of incentives. Interestingly, the role of structure is almost absent in the initial version of the theory. More recently, Radner (1992:1382-1415) and Van Zandt (1999:125-160) extended the theory to account for process decentralization (i.e., different members perform different tasks) in hierarchical organizations (i.e., tree-like graphs). These models, which are almost solely focused on efficiency measures, analyze the number of operations it takes an organization to perform a given task.
Sah and Stiglitz (1988:451-470) contributed to the team-theoretic approach by introducing two new elements into it: modeling communication patterns as sequential or parallel and measuring performance as omission and commission errors. They used this approach to mathematically analyze organizations with two members committees. An appealing characteristic of their approach is that it creates bridges between organization design and vast and distant literatures: parallel and sequential structures have been well studied in fields as disparate as reliability theory (Rausand and Hoyland, 2004:52), circuit design (Moore and Shannon, 1956/1993; Von Neumann, 1956:43-98), and machine learning (Hansen and Salamon, 1990:993-1001); and omission and commission errors have been well studied in statistical decision theory (Berger, 1985:34), diagnostic testing (Hanley and McNeil, 1982:29-36), and signal detection theory (Green and Swets, 1966:76).
Another literature that has contributed to the understanding of the interplay between structure and performance is the work by Bower (1970:82) on the resource allocation process, which has gained further development and attention with the development efforts of Burgelman, Christensen, Doz, Gilbert and others. This line of research has described the complex and subtle processes whereby projects are identified, proposed, refined, and approved in large corporations (see Bower and Gilbert, 2005:11).
However, one of the most important issues to researchers that concern structure and performance is analyzed by the group decision-making literature, the issue of whether groups take more or less risks than its members, remains an open question (Connolly and Ordonez, 2003:493-517). Although previous literatures have provided many important insights on what is the impact of structure on performance, the field of organizations lacks an empirically validated theory that starting from structure at the level of individuals is able to predict organization-level measures of performance relevant to the organization. Generally, the previously reviewed literatures do not provide such a theory because of at least one of the three following reasons: not describing structure at the individual level of analysis, not predicting measures of performance useful to strategy research, or not having empirical support.
The above is the void that this research intends to fill; therefore, this research will focus on the effect of structure on performance of the organization from the perspective of describing the structure at the individual level of analysis, predicting measures of performance useful to strategy research, and having empirical support among banks in Nigeria.
STATEMENT OF THE PROBLEM
