Impact of organizational Structure

Impact of organizational Structure, and Culture on Employee Performance with moderating effects of Stress – SMEs perspective from Pakistan


Culture is a shared value, rituals, beliefs followed by individuals collectively in a given context. These values and beliefs collectively built and affect the personalities and behaviors of individuals living in a particular country, society or working in any organization. Organizational culture specifies the employee behaviors and affects the way they work, communicate and dress/appear. Organization culture can also be discussed in terms of climate/ environment that prevail within that specific organization. Dynamic or less rigid culture means that organization encourages supportive, cooperative, innovative, socially interactive organizational environment/climate. This study will discuss the impact of organization culture on employee performance, in terms of cooperative and innovative culture.
In this reference Stewart (2010) believed that the strongest element of the work culture is the beliefs and attitudes of the human resources. He also acknowledged that an organization’s cultural custom powerfully have an effect on all who are concerned in the organization. Individual’s norms are just about invisible, but if we would like to get better performance and profitability, norms are one of the primary places to come across. Together innovations and a consistent culture establish the correctness of a firm’s behavior that can add to its performance. Actually, organizational culture is not just a significant cause of an organization; it is the essential driver of advanced business performance (Gallagher ; Brown, 2007). According to Gupta ; Govindarajan (2000), organizational culture engages six main kinds: information systems, people, procedure, management, reward system and organization formation. Every one of these kind comprise factors that come down from it.
Since for the connection between innovation and performance, Bowen et al., (2009) acknowledged that such a relationship has been unsure. There is changeability in the literature concerning whether innovation show the way to better performance or not. That is why this study emphasizes to find out the relationship between innovative culture and performance of employee.
Structure means the sculpture or in simple words a skeleton of the organization that illustrates the overall appearance and functionality of the organization. Structure pre-defines the pattern, rules ; regulations, policies ; procedures, tactics to be strictly observed, followed and carried out in order to perform any job or task within that organization. It determines the extent to which
• Rules and regulations or predefined SOPs are to be implemented i.e. flexibility or strict rule to be implemented.
• The locus of control / span of control / decision making power
• The extent to which all the departments are inter-related/inter-connected in order to work in collaboration with other departments.
Organizational structure can be described in terms of (1) formalization i.e. rules ; regulations, predefined procedures, SOPs etc that guide the employee behavior to work accordingly, (2) centralization i.e. locus of control and decision making power and (3) integration i.e. inter-cooperation ; inter-relatedness of different sub-divisions or department of an organization (Andrews ; Kacmar, 2001; Sciulli, 1998; Robbins ; Decenzo, 2001; Germain, 1996).

When raw data is processed it becomes information and when this information is further refined and processed it transforms into knowledge. Knowledge provides the meaningful insights about phenomena and proves to be helpful to make effective decisions. Knowledge does not exist physically rather it is intangible and resides in the minds of person. That is why it needs to be stored permanently so that it resides for longer time within organizations, even if the resource person/employee does not exist anymore.
Small and Medium Enterprise (SME) , as illustrated by name itself, are small or medium sized business that are different in structure, ownership, assets etc. from large organizations. As per SME Banking Regulatory Framework the Infrastructure, Housing and SME Finance Department of State Bank of Pakistan defines the SMEs as an entity or business that is not registered as public limited company and can be distinguished from large size organizations on the following basis:
1. Total number of employees – not more than 250 employees if business is of manufacturing concern and in case of service or trading business 50 or less employees
2. Total Assets (excluding Land and Building) – Rs. 50 million or less for trading or services business and Rs. 100 million or less for manufacturing concern business.
3. Net Sales – Rs. 300 million or less as per latest financial statements
Besides, Ownership and management differs from that in the large organizations. Usually, in SMEs, manager is the owner of the business. Fewer decision makers are in management and shorter the vertical line hence, communication is faster. Structure of SMEs is simpler and less complex, low degree of specialization. They possess a unified culture and employees know much about their colleagues. Simple planning and control system, flexible and adaptable processes also differentiate them from the larger businesses. Employees are more versatile, modest human resource possesses closer and informal working relationship. Their focus is on small markets. Normally they opt for niche markets (Wong ; Aspinwall, 2004).
Employee performance can be measured in terms of Employee’s job satisfaction, job commitment and his level of motivation. Job satisfaction is the level or extent to which an employee is satisfied or pleased with the job/tasks assigned to him. And commitment deals with the degree to which an employee feels belongingness and involvement with his assigned tasks and organizations (Muthuveloo & Rose, 2005). More satisfied employees feel more sense of belongingness with their organizations hence they are more committed and perform well (Stup, 2006).The performance of an employee can be accessed through his level of job satisfaction and commitment. Numerous studies have proved that the terms like employee job satisfaction, motivation and commitment are interrelated and interdependent. Adding up these entire phenomenons, it directly affects and describes the overall employee performance.