effect of organizational structure on the performance of organization

MASTER OF SCIENCE

(ENGINEERING BUSINESS MANAGEMENT)

Organizational Behaviour and Development

MDE1133

INDIVIDUAL ASSIGNMENT

LECTURER NAME :

DR. WAN NORMEZA BINTI WAN ZAKARIA

NO. NAME STUDENT ID

1 ARRENVALAGAN A/L KANESAN MRS141075

2

TABLE OF CONTENTS

NO. DESCRIPTION PAGE

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RESEARCH REVIEW 1 ORGANIZATIONAL STRUCTURE: INFLUENCING FACTORS AND IMPACT ON A FIRM

1.1 Bibliographic

1.2 Introduction

1.3 Brief Summary

1.4 Results

1.5 Contributions

1.6 Foundation

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RESEARCH REVIEW 2 THE IMPACT OF ORGANIZATIONAL STRUCTURE ON EMPLOYEES CREATIVITY

2.1 Bibliographic

2.2 Introduction

2.3 Brief Summary

2.4 Results

2.5 Contributions

2.6 Foundation

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3 APPENDIX 3.1 JOURNAL 1

3.2 JOURNAL 2

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1.0 RESEARCH REVIEW 1

1.1 Full Bibliographic Reference

Quangyen Tran, Y. T. (2013). Organizational Structure: Influencing Factors and Impact on a Firm. American Journal of Industrial and Business Management , 8.

1.2 Introduction

This paper presents the findings of a study to evaluate the influencing factors and impact on organizational structure. Organizations are founded by groups of people with the

purpose of achieving effects that one person cannot achieve individually. As the effect, improved results are being obtained in the organization which directs organization to

achieving some organizational goals. To achieve these goals organizations create inner

order and relations among organizational parts that can be described as organizational structure.

This paper is targeted to that audience from the background of industrial and business management. The variables studied were identified from among the factors considered in contingency theory and by incorporating elements of the strategic choice approach.

This research is conducted on empirical approach. The data collection is done thru survey by questionnaires and analysis is done was analyzed using multivariate analysis in order to understand the outcome of the research.

1.3 Brief Summary

The factors that influence an organizational structure are traditionally divided into two

main factors. These factors which determine the structure, aims and activities of the organization can be grouped into external factors and internal factors. External factors are those factors which are out of control but it affects the structure and development of the

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organization. These include economic factors which define the economic situation where production and processing take place, socio-economic factors that define the socio-economic context in which the organization operates; and political-administrative factors which define the legal boundaries and organizational options. Internal factors are those organizational characteristics which create a basis for measuring and comparing organizations. These include mission statement of the organization and organizational instruments.

The influencing factors that have been considered in this study are among the factors described by contingency theory, and by incorporating elements of the strategic choice

approach. Many authors have noted the impact of these factors and elements on organizational structures. Indeed, in response to different environmental circumstances, the organizational structure is conditioned by decisions regarding the internal organizational level in general and designed variables in particular (centralization, formalization and control), both of which are governed by organizational leaders perceptions and preferences in response to external factors. There are several factors taken into account in this study which are Decentralization of decision making, Marketing considerations, Liberalization of the economy, Customer interaction,

Intensifying competition and Value of innovation.

Qualitative type of methodology was used in this research. In order to provide an independent source of information about the sample firms degrees of organizational development, an email survey were carried out to collect data about these firms. A sample size of fifty six firms located in Hanoi, Vietnam was used in this study. The questionnaire used in the survey consisted of questions sought to obtain data on the use of the different technologies, employee training and the number of hierarchical levels. Basically the firms were asked how the influencing factors used in this research have modified the organizational structure.

To understand the behavior of the variables studied, the data was analyzed thru

multivariate analyses which are exploratory factor analysis and cluster analysis. An

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exploratory factor analysis is the type of analysis that allowed the variables to be grouped in a theoretical rather than an observable factor meanwhile a cluster analysis that enabled groups of firms to be created that were related to organizational structures.

1.4 Results

The study focuses on six variables as influencing factors in an organization structure. Based on the analysis, it was found out that those firms with complex organizational

structure considers that variables of internal factors to be modifiers of structure, however firm with simple organizational structure believes these variables do not modify their

structures.

Accordingly, depending on the presence, direction and intensity of the forces exerted by various environmental dimensions and of decisions on how to manage the work, the division of activities in which firms were committed will be determined toward the production of different organizational forms. That is why studying influencing factors on organizational structure is one way to improve organizational effects on firms.

As a lesson learnt, a well designed organizational structure promotes success. Businesses require structure to grow and be profitable. Ensuring an effective organization structure

helps top management identify talent that needs to be added to the company. If an organizational structure does not fit the companys goals and objectives, it can hinder cooperation therefore, the completion of tasks will result in slower cycle times and inefficient use of resources.

1.5 Contributions

As for the contribution of organization structure towards organization efficiency is as

follows:

1.5.1 It facilitates administration

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Inadequate and unscientific organization may result in duplication of work and efforts. Sometimes this might cause important operations left out. As such, organization structure

will facilitate the performance of various managerial functions by division of labor, consistent delegation of job, definition and clarity and responsibility.

1.5.2 It promotes growth and diversification Only sound organization designed on scientific principles can create conditions conducive to planned expansion and diversification of the activities of the enterprise.

Sound organization helps in keeping the various activities under control and increase the capacity of the enterprise to undertake more activities.

1.5.3 It fosters coordination: It is an important contribution of bringing coordination among the various departments in an organization. It creates clear cut relationship between the departments and helps in laying down balanced emphasis on various activities. It also provides for the channels of communication for the coordination of the activities of different departments.

1.5.4 It enhances the productivity through: This will avoid the duplication of activities and confusion which can be considered as wastage of efforts. When it comes to organizational structure, it enhances the productivity

of the firm.

1.5.5 It ensures an optimum use of human resources: Organizational Structure matches the jobs with the individuals and vice-versa. It ensures that every individual is placed on the job for which he is best suited. This helps in the better use of individuals working in the enterprise.

1.6 Foundation

The foundation for this study is that there are many different opinions on organization

structure. Many researchers defined organization structure on their own way which

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multiple factors that influencing the organization structure contradicts with each other. One of the theoretical foundations abstracted from the journal was Walton identified structure as the basis for organizing, to include hierarchical levels and spans of responsibility, roles and positions, and mechanisms for integration and problem solving. Thompson said that structure is the internal differentiation and patterning of relationships. He referred to structure as the means by which the organization sets limits and boundaries for efficient performance by its members, by delimiting responsibilities, control over resources, and other matters.

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2.0 RESEARCH REVIEW 1

2.1 Full Bibliographic Reference

Azfar, A., Muhammad, A. A., Zain, R., & Asif, S. (2014). The Impact of Organizational Structure on Employees Creativity:. Information and Knowledge Management , 4, 19.

2.2 Introduction

The paper presents the main building blocks of organizational structure that influence the

employees creativity in telecommunication sector of Pakistan. The three variables of organizational structure including centralization, formalization and work specialization were selected to find out the impact of organizational structure on the employees creativity at workplace. The results revealed that centralization and formalization strongly and negatively influence the creativity management at workplace whereas work specialization has a less significant negative influence on employees creativity as

compared to the other two elements of organizational structure.

This targeted audience group of this research is managers and top management of an organization which will help them to make effective structural changes associated with

the employees creativity.

This research is conducted on empirical approach. The paper analyzed the impact of organizational structure on employees creativity empirically by designing a questionnaire. A survey was also conducted and administered in the Islamabad and Lahore. The population for the study consists of the entire telecom sector of Islamabad that are working and pursuing their career in the various fields of telecommunication sector in the Islamabad and Lahore. Sample size was 240 officials of telecom sector

under consideration in this study. The data was collected on a self-constructed research instrument covering three variables identified for this research. They are centralization,

formalization and work specialization. Fifteen research items in total were finalized after

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pilot testing and ensuring the internal validity and reliability of scale. A structured questionnaire contacting close ended questions was used measuring all the variables on a 5 point rating scale.

2.3 Brief Summary

The main purpose of this research is to identify the influence of an organizational structure on employees creativity. The industry that the research was conducted was

telecommunication industry of Islamabad, Pakistan. This is because it is an important setting for research on organization structure and its influence on employees creativity.

The telecom industry is attractive for the investors in Pakistan and investors return depends upon the working of the organization. The paper discovers the nature of the affiliation between elements of the structure and employee creativity in the telecom sector of Islamabad Capital territory and Lahore, Capital of Pakistans largest Province, Punjab.

For this research study there are three variables considered to develop the relationship between structure and employees creativity. They are:-

Creativity: Creativity means freedom of expression with the limited decisional power to generate the new ideas for the accomplishment of organizational goals.

Work specialization: Work specialization also known as division of labor means the

division of work into different, operate and specialized takes so that the work can be done with the minimal waste and maximum output rather than everyone in organization involve in every step of developing of product and services .

Formalization: Formalization is a step in which jobs within the organization are standardized and upgraded. It can also be defined as the degree to which the rules and regulations direct the employees and managers.

Quantitative type of methodology was used in this research. A survey was also conducted and administered in the Islamabad and Lahore and the population for the study consists of the entire telecom sector of Islamabad that are working and pursuing their career in the

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various fields of telecommunication sector in the Islamabad and Lahore. Sample size was 240 officials of telecom sector under consideration in this study.

To understand the behavior of the variables studied, the data was analyzed thru regression analysis and correlation analysis.

2.4 Results

From the analysis, organizational structure has a very a strong influence on the

employees creativity. The 3 elements of organizational structure namely centralization,

formalization and work specialization negatively affect the employees creativity. Below are the results:-

1) The study reveals that if the organization is highly centralized it will lead to a strong decrease in creativity of employees as the employees will get a less chance to take creative initiatives. On the other hand, the decentralized structure with more autonomy will encourage the employees creativity for the achievement of

organizational objectives.

2) Meanwhile, formalization also affects the employees creativity at workplace negatively. If the organization is has a more formalized systems and procedures, there will be less chances of workplace creativity.

3) Besides that, work specialization also has a negative relationship with the employees creativity but it has a relatively less significant impact as compared to the other two variables. But it is very obvious from the present study that work specialization and division of work among the employees increases the efficiency at workplace but it ultimately leads to a certain reduction in employees creativity. The more the

specialization of work, the lesser the creativity management at workplace.

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From the results above, it implies that organizational structure strongly affects the creativity at workplace in the negative direction. The centralization and formalization must be suppressed in an organizational structure to develop employees creativity. The organizations must develop a decentralized and less formal structure to promote the employee creativity. It will enable the employees to contribute creatively towards the betterment of the organization. The employees should be given more authority with accountability so that they can take in time decisions to solve the problems of their customers. It will also help to reduce the customer complaints. The lesser the use of

strategic plans, orientation kits, professional development guidelines, job descriptions, policy manuals and the like which dictate to employees how they are to go about

particular activities, the lower the level of formalization within an organization and it will lead to enhanced employees creativity at workplace.

2.5 Contributions

As for the major contribution of this research towards organization efficiency is creativity at workplace. The below explains why creativity is important in an organization:

2.5.1 Increase productivity Stimulating creativity involves moving away from familiar ground to discover something

better towards achieving the goal of an organization. Also, encouraging employees for the skills of creativity is the cost-effective way of increasing productivity at workplace.

2.5.2 Solving problem in the new way For instance, when stimulated and encouraged by creativity training, employees tend to come up new solutions when they encounter a problem.

2.6 Foundation

The foundation for this study is that, creativity is simply making things better that widen

the vision. Organizational work is done by the employees and employees output depends

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upon the environment of organization. Organizational structure is an overall basis that may be major cause of the output. Creativity, formalization, centralization and work specialization are some of the factors that may affect the output of employees in telecom

sector. The main function of an organization is to use individual strengths collectively that enables to achieve more than that which can be accomplished by the combined work of group-members working individually. Employee creativity is fundamental and significant for the prospective success of an organization. It develops a feasible advantage for an organization over another if it has employees with outstanding creative

abilities. Organizational structure does have both negative and positive impacts on employees creativity. Employee creativity is about engaging in innovative behaviors that

are designed to produce new ideas, processes, products and services. These innovative ideas can be big or little, fundamental or incremental, created by a requirement or by insight are helpful and favorable for a person, group or an association.

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APPENDIX

American Journal of Industrial and Business Management, 2013, 3, 229-236 http://dx.doi.org/10.4236/ajibm.2013.32028 Published Online April 2013 (http://www.scirp.org/journal/ajibm)

229

Organizational Structure: Influencing Factors and Impact on a Firm

Quangyen Tran1,2, Yezhuang Tian1

1School of Management, Harbin Institute of Technology, Harbin, China; 2National Economics University, Hanoi, Vietnam. Email: [email protected] Received November 3rd, 2012; revised December 17th, 2012; accepted January 18th, 2013 Copyright 2013 Quangyen Tran, Yezhuang Tian. This is an open access article distributed under the Creative Commons Attri- bution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

ABSTRACT The influence of certain factors on organizational structure has been in researchers focus for years, together with their impact on the overall organizational efficiency. Many of these factors are from the environment where traditional view commonly divided into internal and external factors. This paper presents the findings of a study to evaluate the influencing factors and impact on organizational structure of a sample of firms located in Hanoi, Vietnam. Structured questionnaires were administered with respect to these factors. The variables studied were identified from among the factors considered in contingency theory and by incorporating elements of the strategic choice approach. After grouping the variables into two factors (related to external and internal respectively), the results revealed three groups of firms according to how they regarded the impact of these factors on organizational structures. In those groups that consider the variables of internal factors to be modifiers of structure the organizational structures are of the complex classical type, whereas simple forms predominate in the group that believes these variables do not modify their structure. Keywords: Organizational Structure; Firm; Influencing Factors; Contingency; Resources

1. Introduction Organizations are formed by groups of people with the purpose of achieving effects that one person cannot achieve individually. Better results are created as a con- sequence of organizational effect which directs organization to achieving some organizational goals [1]. Regard- ing the purpose of the organizations founding, they can be described as successful (profitable) or failure (non- profitable) ones. To achieve these goals organizations create inner order and relations among organizational parts that can be described as organizational structure. All organizational parts together with relations and mechanisms of their coordination are important for proper functioning of any organization. Organizations are influenced by many factors which come from their dynamic surrounding or from the organization itself. Due to the static nature of organizational structure, it sometimes cannot meet requirements of efficiency and adoptability. Classics in the field of organization theory represented many different schools of influencing factors on organizational structure. Some believed that certain factors, such as size, environment, or technology, determined

organizational structure. They argued that these factors imposed economic or other constrains on organizations that forced them to choose a certain structure over others. Organizational structure is partly affected by the firms external environment [2-5]. Research suggested that firms organized to deal with reliable and stable market may not be as effective in a complex, rapidly changing environment [6,7]. The more certain the environment is, the more centralized hierarchy the firms organizational structure may have, with formalized rules and procedures [5]. Organizations that operate with a high degree of environmental uncertainty may decentralize decision- making [8], relying on formal rules and policies [9], and flatten their hierarchies [10]. The influence of certain factors on organizational structure is traditionally divided into two main factors. These factors which determine the structure, aims and activities of the organization, can be grouped into external factors and internal factors [11]. External factors are those factors from the enabling environment which are not under the control of the organization but which affect its structure and development. These include economic factors which define the economic situation where production and processing take

Copyright 2013 SciRes. AJIBM

Organizational Structure: Influencing Factors and Impact on a Firm 230

place (the market/industry); socio-economic factors that define the socio-economic context in which the organization operates; and political-administrative factors which define the legal boundaries and organizational options. Internal factors are those organizational characteristics which create a basis for measuring and comparing organizations. These include mission statement of the organization and organizational instruments.

2. Literature Review 2.1. The Concept of Organizational Structure There are many different opinions and definitions on organizational structure. Structure in one sense is the arrangement of duties use for the work to be done. This is best represented by the organization chart [12]. In another sense, structure is the architecture of business competence, leadership, talent, functional relationships and arrangement [13]. Walton [14] identified structure as the basis for organizing, to include hierarchical levels and spans of responsibility, roles and positions, and mechanisms for integration and problem solving. Thomp- son [15] said that structure is the internal differentiation and patterning of relationships. He referred to structure as the means by which the organization sets limits and boundaries for efficient performance by its members, by delimiting responsibilities, control over resources, and other matters. Kartz and Kahn [16] said that structure is found in an interrelated set of events which return to complete and renew a cycle of activities. Jackson and Morgan [12] used a modified definition originally for-mulated by [17]. They defined structure as the relatively enduring allocation of work roles and administrative mechanisms that creates a pattern of interrelated work activities and allows the organization to conduct, coordi-nate, and control its activities. Lawrence and Lorsch [5] describe structure as the technique in which the organization is differentiated and integrated. Differentiation is related to the scope in which executives act quasi entre- preneurs, whereas integration is described in such a way that every member of the organization including managers will do their best to achieve organizational goals. Similarly, an organization is a set of elements in interaction, organized level and decision making units [18]. Identification of these elements has always been one of the most important issues facing organizational researchers.

According to Dictionary-Organizational behavioral [19], organizational structure is defined as the estab- lished pattern of relationships among the components of parts of company (The way a company is set-up). They formally defined framework of an organizations task and authority relationships. Sablynski [20] succinctly defined organizational structure as how job tasks are

formally divided, grouped, and coordinated. Or- ganiza-tion structure indicates an enduring configuration of tasks and activities [21]. In other words, organizational structure is a set of methods through which, the organiza-tion divided into distinct tasks and then create a harmony between different duties [22]. Underdown [23] said or-ganizational structure is the formal system of task and reporting relationships that controls, coordinates, and motivates employees so that they cooperate to achieve an organizations goals. Andrews [24] stated that organizational structure consists of job positions, their relationships to each other and accountabilities for the process and sub-process deliverables. Organizational structure directs the competence of work, the enthusiasm of employees and coordination among the top management and subordinates for flow of plans and goals in the organization to sketch the future plans [25]. Organizational structure is a way responsibility and power are allocated, and work procedures are carried out, among organizational members [8,10,26-29]. Zheng, et al., [30] mentioned that the most important components of organizational structure include formalization, centralization, and control. Formalization measures the extent to which an organization uses rules and procedures to prescribe behaviour [31]. The nature of formalization is the degree to which the workers are provided with rules and procedures [32] that deprive versus encourage creative, autonomous work and learning. In organization with high formalization, there are explicit rules which are likely to impede the spontaneity and flexibility needed for internal innovation [33].

Centralization refers to the hierarchical level that has authority to make decision. If decisions are delegated to lower levels the organization is decentralized and if decision making power authority is kept at the top level it is centralized [34]. Centralization also creates a non-par- ticipatory environment that reduces communication, commitment, and involvement with tasks among partici- pants [33]. Organizational control is a cycle that includes the three stages of target setting, measuring or monitor- ing and feedback. Control in the bureaucracy can consist of rules, standards, and internal procedures [34]. Devel- oping and enforcing performance control and behave- ioural prescriptions improve decisions and increases pre- dictability of performance [35]. Chen and Huang [33] claimed that decentralized and informal structure will lead to higher performance. Also Germain et al., [35] studied the effect of structure on the performance mediating supply chain management and found that in stable environment, formal structure has a positive effect on the performance while in dynamic atmosphere negative effect is attained. Therefore, Zheng et al., [30] concluded that there is a negative effect of structure on organizational effectiveness.



Researchers have argued that if organizational theory is to be relevant to practitioners, emphasis should be placed on organizational effectiveness and its influencing factors [36-40]. In the light of this argument, any mean- ingful impact of organizational structure on a firm should be measured in terms of the relationship with the firms effective performance. In discussing the difficulties of determining organizational effectiveness, Bedeian [41] said, Although effectiveness is a central theme in the study of organizations, it remains one of the most fre- quently cited yet least understood concepts in organization theory. Bedeian [41] continued to say that failing to consider organizations goals, characteristics, and con- stituents lead to faulty assumptions of performance. Once an organization decides how it wants its members to behave, what attitudes it wants to encourage, and what it wants its members to accomplish, it can design its structure and encourage the development of cultural values and norms to obtain these desired attitudes, behaviors, and goals [23]. Sablynski [20] found no relationship between employee performance and span of control, but higher levels of job satisfaction were evident in decentralized organizations because span of control portion of organizational structure defines the amount of employees an authority figure is responsible for. The span of control is expressed in one of two ways: a wide span of control where managers supervise many employees as well as a narrow span of control where managers supervise few employees [42]. Sablynski [20] says organizational structure decreases employee ambiguity and helps explain and predict behavior. Brown [43] believed the basis for organizational structure is alignment of the organization purpose with necessary resources. Companies that grow rapidly are those that make the best use of their resources, including management talent. As a company grows, the impact on the structure of the organization is significant. This can be especially true when the organization be- gins to expand to other geographic regions and the structure of the organization is spread out over many miles.

A company may start out small; however, as time goes by when more employees may be hired, it is necessary for the departmental managers to create a managerial structure. Additionally, an executive team may be re- quired to run the various aspects of the business, and there may be the need for middle managers who would report to the managers. Penguin [44] stated that, organizational effectiveness and its relation to structure is determined by a fit between information processing requirements so people have neither too little nor too much irrelevant information. However, the flow of information is essential to an organizations success [45]. The organizations structure should be designed to ensure that individuals and departments that need to coordinate their

efforts have lines of communication that are built into the structure. Companies may use various organizational structures for communication purposes. Large companies have many levels of management. Therefore, the most effective way to communicate is from top of the organization down. Executives create certain operational procedures which they communicate to directors and managers. Managers, in turn, explain these operational procedures to subordinates or hourly employees. Wolf [13] said structure has a direct effect on the success of an organization operational strategy. Good organization structure influences the execution behaviors of a company. Structure not only shapes the competence of the organization, but also the processes that shape performance. Therefore, Clemmer [46] supported the idea that organizational structure shapes performance: Good performers, in a poorly designed structure, will take on the shape of the structure. Many organizations induced learned help- lessness. People in them become victims of the system. This often comes from a sense of having little or no control over their work processes, policies and procedures, technology, support systems and the like. These feelings are often amplifies by a performance management system that arbitrarily punishes people for behaving like the system, structure or processes they have been forced into. Walton [14] tied structure to effectiveness, asserting that management restructuring is designed to increase not only the efficiency but also the effectiveness of the management organization. Walton [14] associated quicker responses to problems, increased unity of functions, coher- ent and consistent priorities, enhanced abilities, and career satisfaction with the performance benefits of structural alignment. A given structural alignment can only emphasize a few of the interdependencies among activities. Therefore, appropriate structures must ensure that the most important types of coordination occur [14]. Or- ganizational structure includes decision-making, customers needs, and harnessing experience [8,10,27,29,36]. Decision-making authority is influenced by organizational structure. In decentralized structure front-line employees are often empowered to make on the-spot decisions to meet customer needs [47]. An example of this is the clothing store clerk who is able to offer a refund or exchange without managements authorization. In central structures, low-level employees pass critical information to managers, who make the majority of decisions. Organizational structure has an impact in harnessing experience of employees [45]. Companies may arrange their companies by specific functions, such as marketing, accounting, finance and engineering. The purpose of grouping departments by function is to use the experience of groups to accomplish tasks and projects.

A certain synergism exists when skilled employees of



similar talents work together as a whole. For example, marketing and advertising managers can better evaluate the potential success of a new product introduction as a group.

2.2. The Influencing Factors In this study the influencing factors we considered are among the factors described by contingency theory, and by incorporating elements of the strategic choice approach. Many authors have noted the impact of these factors and elements on organizational structures. Indeed, in response to different environmental circumstances, the organizational structure is conditioned by decisions regarding the internal organizational level in general and designed variables in particular (centralization, formalization and control), both of which are governed by organizational leaders perceptions and preferences in response to external factors. The factors taken into account in this study are:

2.2.1. Decentralization of Decision Making Menon and Varadarajan [48] maintained that, centralization fosters a hierarchical organizational structure where- by ultimate power and decision-making is concentrated at the top rather than shared with lower levels of the or-ganization. Hollenbeck [49] argued that one of the most widely-studied dimensions of organizational structure is centralization, which deals with the aspect of vertical structure and refers to the degree to which decision- making authority and responsibility for coordination re- sides at the top of the organizational chart as opposed to being distributed throughout lower levels.

2.2.2. Customer Interaction Auh and Mengue [50] attempted to relate this factor to centralization and concluded that as customer interaction demands a broad focus of authority and organization- wide participation, it requires more decentralized and less hierarchical structures. Similarly, Jabnoun [51] sought to identify the organizational structure that supports the implementation of customer interaction total quality management. The results show that the dimensions of process network and organic structure support the implementation of customer-interacted total quality management, while risk aversion, mechanistic structure and complexity impede it.

2.2.3. Value of Innovation Selto et al., [52] addressed the issues of the best fit of organizational structure and controls for just-in-time and total quality management.

2.2.4. Marketing Considerations Sundaram and Black [53] argued the need for better and newer applications of organizational theories to the study

of multinational enterprises.

2.2.5. Intensifying Competition Vroom [54] attempted to elucidate how organizational design characteristics are related to the competitive behavior of firms. Although previous research suggests that in cases of strategic substitutability, firms tend to choose organizational structures and compensation systems that commit the firm to behaving aggressively in the product market, thus reducing firm and industry profits, he argued that simultaneous determination of organizational structure and compensation systems may enable firms to tacitly collude and achieve the perfectly collusive outcome despite the non-cooperative setting.

2.2.6. Liberalization of the Economy Snow et al., [55] proposed a network organization structure as an organizational response to a context of global- ization, technology transfer and technological change, deregulation, changing workforce demographics, manufacturing advances, faster, lower cost communications and greater social and political freedom.

This paper integrates many business management lit- eratures to understand the influencing factors and impact of organizational structure in an organization. Therefore, the paper develops a research frame work that examines the concept of organizational structure and it influencing factors on selected firms in Hanoi, Vietnam.

3. Methodology The methodology used in this study was qualitative. Therefore, in order to provide an independent source of information about the sample firms degrees of organizational development, we used email survey to collect information about these firms. A sample size of fifty six firms located in Hanoi, Vietnam was used in this study. The questionnaire used in the survey consisted of questions sought to obtain data on the use of the different technologies, employee training and the number of hierarchical levels. Specifically, firms were asked to assess how the variables defined above (see also Table 1) had modified the organizational structure, rating the degree of modification on a Likert scale from 0 to 10, where 0 Table 1. Results of exploratory factor analysis applied to the variables studied.

Items First Factor Second Factor

Decentralization of decision making Marketing considerations

Liberalization of the economy Customer interaction

Intensifying competition Value of innovation

0.981 0.962 0.874 0.110 0.298 0.500

0.181 0.153 0.432 0.816 0.801 0.600



meant not modified at all and 10 meant completely changed. The data was analyzed using multivariate analysis in order to understand the behavior of the variables studied. Two analyses were applied: 1) an exploratory factor analysis that allowed the variables to be grouped in a theoretical rather than an observable factor; and 2) a cluster analysis that enabled groups of firms to be created that were related to organizational structures. Both analyses were described below.

3.1. Exploratory Factor Analysis The aim of the exploratory factor analysis was to group the variables into a few latent factors, in which the most closely related variables are linked together in the same factor.

We applied two tests of the correlation matrix: 1) Bartletts test of sphericity (measures the null hypothesis that the there is a linear dependence between two variables) and 2) the Kaiser-Meyer-Olkin test (a statistic which indicates the proportion of variance in a sample). Both tests are measures of sampling adequacy to validate the use of factor analysis. Bartletts test with the value of 2 = 364.74 (significance level: 0.000) confirmed the linear dependence between the variables, and thus the analysis could continue; the Kaiser-Meyer-Olkin (KMO) test with a value of 0.931, also confirmed that factor analysis was likely to generate satisfactory results [56]. Two factors were extracted from the analysis. The KMO criterion was used to retained only those factors that represented Eigen values of one or greater. These first two factors accounted for 93.06% of the initial variance, which represented a good proportion of information. Ap- plying the method of Varimax rotation, loadings were obtained for each factor for each of the variables (Table 1). The two factors obtained were then used as inputs for a cluster analysis, which aims to group firms with a similar within-group (but different between-group) behavior. This analysis is described below.

3.2. Cluster Analysis This analysis sought to classify the firms according to their orientation, that is, more strategic or more customer-oriented. The method employed was hierarchical [57] and used distances to measure the similarity or dissimi-larity between individuals. The method used to obtain the groups was that of Ward [58], this being one of the most robust methods and one that is able to create homogene- ous groups with minimum variance. This resulted to a three-group classification. The models goodness-of-fit was measured through the mean square of the eta, 2 as 0.768 (2 = 0.768). To complete the description of each group by adding information about its organizational structure, a contingency table was drawn up to determine

whether there was a relationship between groups and structures. Structures were grouped into three general forms: simple (linear, functional, adhocratic), complex classical (line-functional, divisional, in matrix, collegial) and complex new (federal, in clover, network). The con- trast was statistically significant at the 90% level, with p-value = 0.113.

4. Results and Discussion The first factor represents the variables that are more closely related to internal factors, while the second con- cerns issues related to customer interaction. In the first factor all variables have a high loadings-decentralization of decision making, marketing considerations, and liberalization of the economy. This factor measures whether these variables linked to internal factors modify in some way the structure of the organization. In the second factor the contributions were lower, and the biggest differ- ence concerned the variable value of innovation which only makes a minor contribution. The two variables are related to customer interaction, since greater competition to meet customer expectations will help to avoid losing a market share. Value of innovation is important to obtain the product or service that satisfies customers.

The results of cluster analysis from the inputs of the two factors revealed three groups of firms as shown in Table 2.

4.1. Group 1 This group had twenty four firms and it is the largest group detected (42.90% of the sample). The firms from this group consider that variables related to internal factors have not modified their organizational structures; external factors such as customer interaction variable was also regarded not to have modified structures, although to a lesser extent. The members of this group mostly present simple structures (48% of firms organization), complex new forms (31% of firms organization) and complex classical forms (21% of firms organization) are the least frequent.

4.2. Group 2 Comprised seventeen firms, representing 30.36% of the sample, members of this group rate both factors almost

Table 2. Description of groups.

Main organizational structures Firm

Groups Members(InternalFactors)

(External Factors)

Simple Classical New

Group 1Group 2Group 3

24 17 15

1.241.08 0.81

0.14 1.00 0.89

48% 11% 23%

21% 53% 70%

31%36%7%



at the same level in terms of modifying structure. For these firms, internal factors and external factors have both changed their structure. The predominant organizational form in this group is complex classic (53% of firms organization). Complex new structures are present in 36% of firms organization, while simple forms are the least common (11% of firms organization).

4.3. Group 3 This is the smallest group obtained and it includes fifteen firms (26.79% of the sample). In this group both factors were rated similarly, although for internal factors were rated as having changed their organizational structures, whereas external factors were not seen as modifiers these firms. In this group only one firm had the complex new form (8%), whereas simple structures were present in 23% of the firms organization and the complex classic form in 70%.

The above three groups of firms were identified according to the different ways in which they regarded impact of variables that are influencing factors of change in organizational structures. These variables are grouped into two factors, first related to internal factors (factors which are from the enabling environment under the control of the firm) and the second associated to external factors (those factors from the enabling environment which are not under the control of the firm). Results of exploratory factor analysis applied to the variables studied showed that decentralization of decision making makes the largest contribution to the first factor. This outcome reinforces Hollenbecks [49] argument that such a variable as received the most attention in the study of organizational structures. The second factor emphasized customer interaction, which according to Auh and Men- gue [50] was negatively related to the first variable factor. It was the variable that made the greatest contribution. With respect to the resulting groups, the first was the largest, comprising twenty four firms. These firms were simple organizational structures which believed that internal factors did not change their structure. The second group structure consisted of seventeen firms, the majority of which had a complex classical structure; these firms did consider that both internal and external factors modified their structure. The third group of fifteen firms, mostly with a complex classical structure also considered that internal factors modified their organizational structure.

A well designed organizational structure promotes success. Businesses require structure to grow and be profitable. Designing an organization structure helps top management identify talent that needs to be added to the company. If an organizational structure does not fit the companys goals and objectives, it can hinder coopera-

tion therefore, the completion of tasks will result in slower cycle times and inefficient use of resources.

5. Conclusion In this paper we presented the findings of a study to evaluate the influencing factors and impact on organizational structure of a sample of firms located in Hanoi, Vietnam by using structured questionnaires with respect to these factors. It was found out that in those groups that consider the variables of internal factors to be modifiers of structure, the organization al structures are of the complex classical type, where as simple forms predominate in the group that believes these variables do not modify their structures. Accordingly, depending on the presence, direction and intensity of the forces exerted by various environmental dimensions and of decisions on how to manage the work, the division of activities in which firms were committed will be determined toward the production of different organizational forms. That is why studying influencing factors on organizational structure is one way to improve organizational effects on firms. The study focuses on six influencing factors (internal and external) on organizational structure. There- fore, for future research, a larger sample, including more variables related to confidence in the environment is recommended.

6. Acknowledgements We wish to thank all the firms in Hanoi, Vietnam, that collaborated in the study.

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Information and Knowledge Management www.iiste.org

ISSN 2224-5758 (Paper) ISSN 2224-896X (Online)

Vol.4, No.8, 2014

109

The Impact of Organizational Structure on Employees Creativity:

A Sector Based Study

Mushtaq Hassan

Lecturer at Department of Economics, University of Punjab ,Lahore, Pakistan

Muhammad Azfar Anwar

Lecturer at Department of Management Sciences, CIIT Vehari, Pakistan

Zain Rafique

HEC PhD Scholar

Asif Saeed (Corresponding Author)

Lecturer at Department of Management Sciences, CIIT Vehari, Pakistan

E-mail: [email protected]

Abstract The paper examines the main building blocks of organizational structure that influence the employees creativity

in telecommunication sector of Pakistan. The three elements of organizational structure including centralization,

formalization and work specialization were selected to find out the impact of organizational structure on the

employees creativity at workplace. The results revealed that centralization and formalization strongly and

negatively influence the creativity management at workplace whereas work specialization has a less significant

negative influence on employees creativity as compared to the other two elements of organizational structure.

The findings of the study will help the managers and top management of the organization to make effective

structural changes associated with the employees creativity.

Keywords: Creativity, Formalization, Centralization, Work Specialization

1. INTRODUCTION

An organization is an association of people working and executing together to attain common goals and

objectives through classification and division of labor. Organizational work is done by the employees and

employees output depends upon the environment of organization. Organizational structure is an overall basis

that may be major cause of the output. Creativity, formalization, centralization and work specialization are some

of the factors that may affect the output of employees in telecom sector. The main function of an organization is

to use individual strengths collectively that enables to achieve more than that which can be accomplished by the

combined work of group-members working individually. Employee creativity is fundamental and significant for

the prospective success of an organization. It develops a feasible advantage for an organization over another if it

has employees with outstanding creative abilities. Organizational structure does have both negative and positive

impacts on employees creativity. Employee creativity is about engaging in innovative behaviors that are

designed to produce new ideas, processes, products and services. These innovative ideas can be big or little,

fundamental or incremental, created by a requirement or by insight are helpful and favorable for a person, group

or an association [1]. In a nutshell, creativity is simply making things better that widen the vision.

The paper is an attempt to find the influence of organizational structure on employees creativity in

telecommunication industry. Telecommunication industry of Islamabad, Pakistan is selected to conduct the

present study because it is an important setting for research on organization structure and its influence on

employees creativity. The telecom industry is attractive for the investors in Pakistan and investors return

depends upon the working of the organization. The paper discovers the nature of the affiliation between elements

of the structure and employee creativity in the telecom sector of Islamabad Capital territory and Lahore, Capital

of Pakistans largest Province, Punjab. The findings of the present paper will help the managers and top

management of the organization to make effective structural changes associated with the employees creativity

because the end of day organization seek for return and returns are open upon the employees working.

2. MATERIALS AND METHODS Organizational trust is a very important thing and theorists are constantly writing about the significance of it

since long time. According to the current theorists, Interaction of employees and mutual interest play the most

vital an important role in an organization as they are the key tools to generate employees creativity. In an

organization, it can be called as a lubricant which diminishes the friction among the employees; moreover, it can

be called as bonding forces that ties altogether incongruent parts, and act as a promoter that ease actions in an

organization. Trust is the only product that enhances the cooperation among the organization and apart from



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mutual trust, there is no other factor that can enhance the employees creativity as this trust do. Other theorists

like Likert and McGregor etc. all were of the view that to enhance employees creativity, trust is the only

important component that facilitates the employees to take bold decisions and resultantly, employees creativity

gets stronger in an organization that benefits the organization.

Argyris pleads that honesty and uprightness has fundamental importance. In addition to this, he has the

point of view that if the employees of an organization were not trustworthy; they would be self-centric and

would be looking only on their benefits [2]. This all scenario will result in an environment, where chances of

creativity of employees will be reduced to the nil and productivity of the organization will be affected badly. On

the other hand, if the employees of an organization are trustworthy and organization facilitates its employees by

providing a trustworthy and creative environment, it will enhance the production of an organization and

employees creativity will be enhanced. In addition to this, he further have the point of view that if an

organization want to enhance and increase its work, the organization would surely have to provide its employees

an environment where they can use their skills upto the maximum level and organization should train its

employees in a way that enhance the employees creativity.

In addition to the above theorists, Cook, J., & Wall, T. after the extensive research on the organizational

behavior has concluded that mutual trust and a trustworthy and open relationship among the employees is the

only tool that can result in the effective management of the organization and enhancement of its employees

creativity [3]. The theorists have positively pointed out that there is no other device than mutual trust and

cooperation that can enhance the effectiveness of the organization and enhance the capability of its management

and members by giving a perfect environment where they can use their skills at their best and employees have an

environment to build their creative abilities and benefit the organization or respective company.

McCauley & Kuhnert has pointed out that organization that have pretty great environment for its

employees to use their creative abilities, that organization will be surely ahead from its competitors as there

would be an environment of mutual trust and creativity in an organization that will surely be considered as a plus

point of the organization among others [4]. Thompson, L. points out clearly that an organization that has lesser

the chances of employees creativity will be not be that much productive as compared to the organization that

have pretty good environment for the creativity of its employees. Resultantly, when the productivity of the

organization would be less, it would definitely create an environment where there would be no trust among the

employees and the low levels of productivity will create an environment that does not support trust, therefore not

allowing trust to arise between individuals [5]. Damanpour recommends that if an organization wants to enhance

employee creativity, it would have to establish a system in the organization that have its environment elastic and

that promotes innovation [6]. The organization that has these qualities will be very innovative and resultantly

will have advantage over its competitors in the market.

According to Meyer & Rowan, if the creative abilities of the employees are very high, the use of

innovation in the organization would also be higher as compared to the other organization [7]. These employees

will plan their work strategically; work with professional skills and respective guideline. If the organization has

higher the level of formalization, it would have higher the level of employees creativity. Amabile gives its point

of view that Creativity is rightly generated in an organization only if the whole of the organization is in the favor

of it [8]. Amiable advises the senior management of the organization to put a system in such a way that the main

priority of the organization should to enhance the creativity of the respective organization. It is noted that an

organization that supports the employees creativity continuously will surely be rewarded for this in the long run.

The organization would not have to pay to the people that bring innovative ideas for the organization. Cameron

& Dennis pointed out rightly that unless the regular culture of creativity is not built in the organization, the

organization would be unable to boost the creativity of its employees [9]. The culture if the organization depends

on the history, ethos, believes and principles of the organization. The culture of the organization is permanent

and its changed very slowly. Usually, the culture of the organization depicts the things that is valuable for the

society and it develops a specific system in an organization, where employees share their ideas and abilities and

thinking on the regular basis to get their work done. Therefore, if the system of the organization has the culture

of creativity and innovation, it will create a healthy environment within an organization. If an organization wants

to get success, it would have to generate an environment which has positivity. The positive environment of an

organization provides the sense of satisfaction among the employees of the organization. Moreover, it supports

the employees emotionally, mentally and a positive environment provides its employees high level of morality.

Hodge et al conclude that organizations hierarchical level is less if it has wider span of control. The

organizations like these are called as uniform organizations and are more creative [10]. While the other

organization that consists of more hierarchical levels have narrow span and are proved to be very less creative as

compared to the other organizations.

Paulus, P.B. and Nijstad, B.A. have developed following under mentioned seven different scope of the

culture of the organization that influence the creativity of employees and organization [11].

1. Risk taking this refers to the decision of employees and organizational team to try something different



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that is new in the market.

2. Resources the accessibility of an organization to the financial means like money, power and power to

act on different plans and complete information of the market and society.

3. Reward systems this is the most important and it is the level to which a company or organization give

incentives to the employees of the organization for bringing innovations and creativity to the goods and

products.

4. Extensively shared knowledge It is the limit up to which explicit knowledge and information is

gathered

5. Specific targets the degree to which the organizational leaders clearly have the point of view that up

to what level the creativity and innovation is needed in definite area that is significant for the organizational

operation

6. Rapidly formed relationships it is the ability of the organization to establish an effective and high

performing team that consists of highly motivated employees who have great innovative and creative

abilities.

7. Tool and techniques it is the level up to which an organization maintains a rational process and way

for bringing innovation that enhances the creativity.

There are chiefly six key elements of organizational structure. These are work specialization, formalization,

centralization and decentralization, departmentalization, span of control, chain of command. However, for the

current study, following discussed three variables which would be considered to develop a relationship between

structure and employees creativity.

Creativity: Creativity means freedom of expression with the limited decisional power. Creativity

means that to generate the new ideas for the accomplishment of organizational goals [12].

Work specialization: Work specialization also known as division of labor means the division of work

into different, operate and specialized takes so that the work can be done with the minimal waste and maximum

output rather than everyone in organization involve in every step of developing of product and services [13].

Formalization: Formalization is a step in which jobs within the organization are standardized and

upgraded. It can also be defined as the degree to which the rules and regulations direct the employees and

managers [14].

Centralization and Decentralization: The centralization and decentralization explains how much

decision-making authority has been delegated to lower levels and subordinates [15].

The research setting can clearly be depicted by the following figure.

FIGURE 1

Hypotheses of the Study

H1: The centralization has an inverse impact on employees creativity.

H2: The formalization has an inverse impact on employees creativity.

H3: The work specialization has an inverse impact on employees creativity.

METHODS

The paper analyzed the main building blocks of structure that influence the employees creativity in

telecommunication sector of Pakistan. The methodology adopted for this approach is empirical in nature. The

paper analyzed the impact of organizational structure on employees creativity empirically by designing a

questionnaire. A survey was also conducted and administered in the Islamabad and Lahore. The population for

the study consists of the entire telecom sector of Islamabad that are working and pursuing their career in the

various fields of telecommunication sector in the Islamabad and Lahore. Sample size was 240 officials of

telecom sector under consideration in this study. The data was collected on a self-constructed research

instrument covering three factors i.e. centralization, formalization and work specialization. Fifteen research

items in total were finalized after pilot testing and ensuring the internal validity and reliability of scale. A



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structured questionnaire contacting close ended questions was used measuring all the variables on a 5 point

rating scale. The estimate of 240 respondents was developed on the basis of stratified random sampling and 219

questionnaires were successfully collected. Finally 202 questionnaires are utilized for analysis purpose and 18

were discarded because of errors, which constitutes 83% response rate and data was analyzed using SPSS. For

data analysis both descriptive and inferential statistics were applied. For the frequencies of various unique

features of respondents descriptive statistics have been applied and for testing our hypotheses correlation and

regression etc. have been applied. But before applying all the tests, we have applied the Cronbachs alpha test to

check the internal validity. Before putting the data for various analyses, it is better to apply Cronbachs alpha to

test the reliability of the data. Cronbachs alpha is a measure of internal consistency, that is, how closely related

a set of items are as a group. Below, for conceptual purposes, we show the formula for the standardized

Cronbachs alpha:

( ) cNv

cN

+

=

1

As far as our data is concerned, it was 0.823 (Table 1) which was quite encouraging figure to put the

data for further statistical analysis.

Table 1

Cronbachs Alpha No of Items

0.823 15

The 78% of the respondents were males and remaining 22% were females. Having socio-cultural ad

religious environ, it was difficult to approach female employees. Even then a considerable portion of the

respondents showed their willingness to fill the questionnaire. In a nutshell, respondents consolidated profile is

described in Table 2.

Table 2

Profile of Respondents

Demographic Characteristics Percentage

Gender Male 78%

Female 22%

Age (Years)

Less than 25 23%

25 35 56%

36 45 12%

46 55 9%

Qualification

Bachelors 29%

Masters 62%

Above Masters 9%

Working Experience

(Years)

Less than 5 27%

6 10 48%

11 15 16%

More than 15 9%

Data shows that out of total 202 responses, 35% were collected from PTCL head-office, 20% from two

Mobilink offices and 23% from U-fone office and 13% from Telenor offices and 9% from Zong office. Survey is

carried out from five major shareholders of telecom sector as the consultation with major players of telecom

sector is necessary. Therefore, the paper has included all the major players of telecom industry of Pakistan that

includes Mobilink U-fone, Telenor, Zong and PTCL.

3. RESULTS AND DISCUSSION

The paper examined these data statistically to know whether there is any evidence of a relationship between the

variables considered. We used regression analysis and correlation analysis to determine the nature of relationship

that exist between Employees creativity and three of its major related pillars Centralization, Formalization and

Work Specialization and strength of their relationship. Regression analysis would help us to nature of

relationship, while correlation analysis helps us to determine the degree to which two concerned variables are

inter-related to each-other. This approach provides understanding regarding the connection between these

variables. The paper first summarizes the primary observations under the headings of proposed questions of

interview and analyzes them with the available literature for comprehension of the research questions. Results



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are based on this analysis along with empirical analysis and will accumulate all the aspect of the issue while

pondering upon the questions given in the succeeding paragraphs with question headings.

CENTRALIZATION

The centralization and decentralization explains how much decision-making authority has been delegated to

lower levels. This is the fact that organizations need to be aware of different elements of organizational structure

that enable employees to contribute creatively towards the success of organization in todays competitive world.

The organizations which want to remain on the leading edge of the business must strive for promoting creative

initiatives among the employees. The results of the variables of centralization are as under:

Centralization V1a

The first variable deals with the issue that if Managers of the organizations are interested in hearing employee

suggestions regarding ways to improve company performance. This question clearly depicts the level of

understanding between the manager and its subordinates which will show the organizational structure of the firm

if it is centralized and decentralized. Following table shows the result

TABLE 3

Frequency Percent

Valid

1.00 28 13.9

2.00 2 0.99

3.00 72 35.6

4.00 50 24.8

5.00 50 24.8

Total 202 100.0

FIGURE 2

Centralization V1a

Centralization V1b

The second variable deals with the issue that if most communication between managers and other

employees in our company can be said to be two-way communication or otherwise. This question clearly depicts

the level of understanding between the manager and its subordinates. Moreover, it explains relationship and

freedom of expression between the manager and its subordinates clearly mentioning centralizing and

decentralizing behavior of the organization towards its employees. Following under-mentioned table shows the

result.

TABLE 4

Frequency Percent

Valid 1.00 6 2.97

2.00 28 13.86

3.00 6 2.97

4.00 120 59.4

5.00 42 20.7

Total 202 100.0

Strongly

Agree

14%Agree

1%

Neutral

35%Disagree

25%

Strongly

Disagree

25%



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FIGURE 3

Centralization V1b

Centralization V1c

The third variable deals with the issue that if Supervisors encourage employees to express differences of opinion.

This question clearly depicts the level of understanding between the manager and its subordinates. Moreover, it

explains relationship and freedom of expression between the manager and its subordinates that up to which level

they can differentiate from their upper hierarchy clearly mentioning centralizing and decentralizing behavior of

the organization towards its employees. Following under-mentioned table shows the result.

TABLE 5

Frequency Percent

Valid 1.00 12 5.94

2.00 20 12.57

3.00 4 1.98

4.00 34 16.83

5.00 132 65.3

Total 202 100.0

FIGURE 4

Centralization V1c

Centralization V1d

The fourth variable deals with the issue that if Employees are usually informed about major changes in policy

that affect our job before they take place. This question clearly depicts that up to which the employees are

informed about the major changes in the organization policy. The reason behind asking this question to

organization employees is that if an employee is well-versed regarding its job policy, he/she can contribute

rightly towards the betterment of the company and use its potential at the maximum level. Table 6 shows the

result

TABLE 6

Frequency Percent

Valid 1.00 18 8.9

2.00 114 56.43

3.00 20 9.9

4.00 42 20.79

5.00 8 3.96

Total 202 100.0

Strongly

Agree

3%

Agree

14% Neutral

3%

Disagree

59%

Strongly

Disagree

21%

Strongly

Agree

6%

Agree

12%

Neutral

2%

Disagree

16%Strongly

Disagree

64%



Vol.4, No.8, 2014

115

FIGURE 5

Centralization V1d

Centralization V1e

The fifth variable deals with the issue that if Employees are afraid to speak up during meetings with supervisors

and managers or otherwise. This question clearly depicts that up to which level the confidence is built between

the employees. If the employees are easy to speak with the upper hierarchy, the organization structure would be

considered to have positive impact on the employees creativity. Table 7 shows the result

TABLE 7

Frequency Percent

Valid 1.00 2 0.9

2.00 74 36.7

3.00 14 6.9

4.00 76 37.62

5.00 36 17.8

Total 202 100.0

FIGURE 6

Centralization V1e

Centralization V1f

The sixth variable deals with the issue that if in our company, there are clear and recognized differences between

superiors and subordinates. This question clearly clarifies the extent of relationship between employees and how

the upper hierarchy deals with the subordinates and so on. If the employees are easy to speak with the upper

hierarchy, the organization structure would be considered to have positive impact on the employees creativity.

Under-mentioned table shows the result

TABLE 8

Frequency Percent

Valid 1.00 26 12.8

2.00 60 29.7

3.00 20 9.9

4.00 92 45.5

5.00 4 1.9

Total 202 100.0

Strongly

Agree

9%

Agree

56%Neutral

10%

Disagree

21%

Strongly

Disagree

4%

Strongly

Agree

1%Agree

37%

Neutral

7%

Disagree

37%

Strongly

Disagree

18%



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FIGURE 7

Centralization V1f

Centralization V1g

The first variable deals with the issue that if important decisions generally are made by a few top managers alone

rather than by people throughout the company. This question clearly depicts that up to which level the

employees imparts their role in the decision-making process. This question gives a clear idea about the

organizational structure and how it can affect employees creativity. If the important decisions are done by the

top managers, it means that organization is highly centralized and organizational structure has a negative impact

on employees creativity. Table 9 shows the result.

TABLE 9

Frequency Percent

Valid 1.00 6 2.97

2.00 78 38.6

3.00 2 0.9

4.00 84 41.5

5.00 32 15.8

Total 202 100.0

FIGURE 8

Centralization V1g

FORMALIZATION

The second part of questionnaire deals with Formalization . Formalization refers to the degree to which jobs

within the organization are standardized. It can also be defined as the degree to which the rules and regulations

direct the employees and managers.

Formalization V2a

The first variable deals with the issue tha

effect of organizational structure on the performance of organization

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