Abstract

This study assessed the Effect of Organizational structure on Employees Performance in Small and medium Enterprises in Buea . To examine the Effect of Organizational Structure on employees Performance in SMEs Buea. Data used for the study were collected through questionnaires from 50 employees in Njeiforbi supermarket and bakery enterprises in Molyko.

The study used both descriptive and inferential statistics through simple regression analysis. The findings of the study showed that Organizational  structures has a positive effect on Employees Performance in small and medium size Enterprises in Buea.

Based on the findings, the study recommends that management in Buea should implement the different types of organisational structure but should focus more on matrix structure and hierarchical structure because they have a high positive and significant effect on employee’s performance while though flat structure is negative its effect on their effect on employee’s performance still remind significant so, they need to be reviewed.

Again, though most of these organisational structure are implemented but flat structure has a negative effect. Therefore, their effect on employee’s performance is still not sufficiently studied hence, this policy needs to be reviewed.

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Employee performance is a multifaceted concept that encompasses the efficiency and effectiveness with which employees carry out their assigned tasks. It is influenced by several factors, including motivation, job satisfaction, organisational culture, and the structural framework within which employees operate (Robinson, 2013).

High employee performance is associated with increased productivity, improved quality of work, and enhanced organisational outcomes (Demerouti, 2007). Employee performance encompasses various indicators, including productivity, quality of work, timeliness, and overall job satisfaction. Productivity measures the output produced by an employee in relation to the input used, while quality of work assesses the standard of work delivered. Timeliness evaluates whether employees meet deadlines, and job satisfaction reflects an employee’s feelings about their role and work environment (Motowidlo, 1993). These indicators are essential for assessing employee performance and understanding how organisational structures impact these metrics.

Organisational structure refers to the formal layout of a company’s hierarchy, roles, responsibilities, and communication channels. It defines how activities such as task allocation, coordination, and supervision are directed toward achieving organisational goals (Judge, 2019). The dimensions of organisational structure include centralisation versus decentralisation, formalisation, complexity, and the span of control. Centralisation refers to the degree to which decision-making is concentrated at a single point in the organisation.

Formalisation indicates how standardised procedures and rules govern behavior within the organisation. Complexity relates to the number of different job roles and departments within an organisation, while the span of control refers to the number of employees that report directly to a manager (Mintsberg, 1979). The organisational structure defines the hierarchy within an organisation, delineating roles, responsibilities, and communication channels (Mintsberg, 1979).

A well-designed organisational structure can facilitate better communication, promote collaboration, and enhance decision-making processes, all of which contribute to improved employee performance. Conversely, an overly rigid or poorly designed structure can lead to confusion, frustration, and decreased motivation among employees (Stalker, 1961). Research indicates that organisations with a flat structure tend to foster innovation and employee engagement, while those with a hierarchical structure may experience lower levels of employee satisfaction (Klein, 2007).

Historically, the relationship between organisational structure and employee performance has evolved significantly. Early studies in the developed world emphasized the importance of bureaucratic structures, characterised by clear hierarchies and formal rules, which were believed to enhance efficiency (Weber, 1947). However, as organisations faced rapid changes in technology and market demands, more flexible structures like flat and matrix designs emerged. Research has shown that flat structures can lead to increased employee engagement and productivity due to reduced layers of management and enhanced communication (Reeves, 2018).

In contrast, matrix structures have been linked to improved collaboration and innovation but can also lead to confusion regarding authority and responsibility (Huang, 2020). Scholarly investigations into the relationship between changes in organisational structure and employee productivity have revealed both positive and negative outcomes. Cameron and Green (2015) demonstrated that well-planned organisational structure changes can bolster employee motivation, job satisfaction, and productivity.

Globally, navigating organisational change effectively necessitates a thorough understanding of its impact on employee performance. Armstrong (1998) emphasized that successful business transformation encompasses the redesign of processes, products, services, and organisational structures. The efficacy of change management practices assumes a pivotal role in moderating the impact of organisational structure changes on employee performance. Armenakis et al.

(2007) and Kotter (1996) underscore the importance of clear communication, employee involvement, leadership support, and training programs in ameliorating the adverse effects of organisational structure changes and fostering enhanced employee performance.

In developed countries such as the United States and Germany, numerous studies have highlighted the impact of organisational structure on employee performance. For instance, a study by Harter et al. (2002) examined the relationship between organisational structure and employee engagement in Fortune 500 companies. The findings revealed that companies with a more decentralised structure reported higher levels of employee engagement and performance.

Employees felt more empowered to make decisions and contribute to the organisation’s goals when they were part of a collaborative environment. Another notable case is that of Toyota Motor Corporation in Japan. Toyota’s organisational structure is characterised by a lean management approach that emphasizes teamwork and continuous improvement (Liker, 2004). This structure has been linked to high employee performance levels due to its focus on employee involvement in decision-making processes and problem-solving initiatives.

Employees are encouraged to take ownership of their work, leading to enhanced productivity and innovation. Similarly, a case study in India by Kumar et al. (2015) found that traditional hierarchical structures often hindered employee performance in SMEs. Employees expressed frustration with rigid reporting lines and a lack of autonomy, which negatively impacted their motivation and overall job satisfaction. The study recommended adopting a more participative approach to organisational structure to enhance employee engagement and performance.

In developing countries, the relationship between organisational structure and employee performance can vary significantly due to cultural and economic factors. A study conducted in South Africa by Coetsee et al. (2013) explored how organisational structure affects employee performance in SMEs. The research indicated that SMEs with a flexible organisational structure experienced higher employee morale and productivity. Employees reported feeling more valued and motivated when their input was sought in decision-making processes.

In Cameroon, the impact of organisational structure on employee performance has been less extensively studied but remains critical for understanding the dynamics within SMEs. A case study conducted by Nguimkeu (2018) focused on SMEs in Douala and revealed that many organisations operated with outdated hierarchical structures that stifled innovation and reduced employee motivation. Employees often felt disconnected from the decision-making processes, leading to lower levels of commitment and performance. In developing countries, including Cameroon, studies have highlighted the challenges SMEs face in implementing effective organisational structures. Research indicates that many SMEs in Cameroon still adopt traditional hierarchical structures that may hinder responsiveness and adaptability (Ngwa et al, 2021).

In Buea specifically, a city known for its entrepreneurial spirit and growing number of SMEs, there is a pressing need to understand how different organisational structures affect employee performance. Limited empirical evidence exists regarding this relationship in Buea, making it essential to explore how flat, matrix, and hierarchical structures influence performance outcomes in local SMEs.

Conversely, a more recent study by Eyoum (2020) examined SMEs in Buea and found that companies adopting a more flexible organisational structure experienced improved employee performance. The research highlighted that when employees were given opportunities for input and collaboration, they demonstrated increased productivity and job satisfaction. Buea serves as an interesting microcosm for studying the effects of organisational structure on employee performance within SMEs. The region is characterised by a burgeoning entrepreneurial spirit, yet many SMEs struggle with traditional management practices that hinder growth. A case study of three SMEs in Buea, an IT firm, a manufacturing company, and a retail business was conducted to assess how their respective organisational structures impacted employee performance. The relationship between organisational structure and employee performance is complex and varies across different contexts.

Despite global advancements in understanding organisational structure’s impact on employee performance, significant gaps remain in the literature concerning specific contexts like Buea. Studies have shown that while flat structures can enhance creativity and job satisfaction in developed countries ( Tschang, 2022), similar findings may not hold true in developing nations where cultural and economic factors differ markedly. The lack of comprehensive research focusing on local contexts like Buea presents an opportunity for further investigation into how organisational structure can be optimised to improve employee performance in SMEs.

1.2 Statement of the Problem

Employee performance is a very critical issue in every organisation. Employee performance is not just a critical success factor of an organisation but a prerequisite for organisational growth and an indicator of productivity in the firm. Better employee performance does not only lead to increased profit to the firm but also leads to wealth creation to the shareholders, better compensation and allowances to employees, motivation and momentum, attracts investors, and puts the firm in a better market position. This implies that the importance of employee’s performance cannot be over emphasized. The challenges surrounding employee performance are multifaceted and vary significantly across different global contexts.

Globally, employee performance challenges related to rigid hierarchical structures that inhibit communication and collaboration. Studies have shown that such structures can lead to decreased employee morale and engagement, ultimately affecting productivity (Harter et al., 2002). In many cases, employees feel disconnected from decision-making processes, resulting in a lack of ownership and motivation to perform at their best. Additionally, the fast-paced nature of global markets necessitates adaptability; however, traditional structures can stifle innovation and responsiveness. Globally, SMEs are recognized as engines of job creation and innovation; however, many faces significant challenges that hinder their performance.

According to the International Labour Organisation (ILO, 2020), SMEs account for approximately 90% of businesses and more than 50% of employment worldwide. Despite their importance, a considerable number of SMEs struggle with employee performance due to various factors, including inadequate organisational structures.

In developed countries, research has highlighted those rigid hierarchical structures can stifle innovation and responsiveness among employees (Brown, 2023). The emphasis on efficiency and competitiveness has led many small and medium sized enterprises to adopt more agile organisational structures. However, those that have not adapted may experience significant drawbacks. For instance, companies with overly bureaucratic structures may struggle with slow decision-making processes, leading to missed opportunities and decreased performance (Kahn, 1978). Employees in these environments often report frustration with excessive red tape and a lack of empowerment, which negatively impacts their productivity and job satisfaction.

In contrast, developing countries face unique challenges that exacerbate these issues. For instance, many of these businesses in Cameroon operate under traditional bureaucratic models that impede agility and limit employee engagement (Alsharif, 2021). These businesses frequently grapple with challenges related to resource constraints and a lack of managerial expertise. Poorly defined roles and responsibilities within organisational structures can create confusion among employees, leading to inefficiencies and decreased performance (Coetsee et al., 2013). Furthermore, cultural factors may influence organisational dynamics; for example, traditional hierarchies may discourage open communication and collaboration, further hampering employee performance. Again, many SMEs in developing countries, including Cameroon, frequently adopt informal or poorly defined structures. This lack of clarity can lead to role ambiguity, reduced motivation, and ultimately lower performance levels among employees (Olowookere, 2021). For instance, a study by the World Bank (2021) highlights that in Cameroon, over 60% of SMEs report challenges related to employee management and performance appraisal systems.

In Cameroonian enterprises face unique challenges related to organisational structure. Many of these enterprises operate with outdated hierarchical models that do not align with modern business practices. Employees often feel marginalised and undervalued, leading to low morale and high turnover rates. Research indicates that such structural inadequacies hinder innovation and growth within these organisations (Nguimkeu, 2018). Additionally, the lack of formal training and development programs exacerbates these issues, as employees are not equipped with the skills necessary to thrive in their roles. Again, this landscape is characterized by a mix of flat, matrix, and hierarchical structures, each presenting unique challenges and opportunities for employee performance. Flat structures, while promoting quick decision-making and flexibility, may also result in overburdened managers and unclear reporting lines (Nguimkeu et al., 2022). Conversely, hierarchical structures can lead to bureaucratic delays and decreased employee morale due to rigid chains of command (Nguiffo, 2020). Matrix structures aim to combine the benefits of both but can create confusion regarding authority and accountability (Zairi, 2020).

In Buea specifically, SMEs are confronted with a high level of competition combined with limited resources. The existing organisational structures often fail to foster an environment conducive to optimal employee performance. A lack of clarity regarding roles and responsibilities in matrix structures can lead to confusion and decreased motivation among employees (Sharma, 2023).

Moreover, hierarchical structures may result in low levels of job satisfaction due to perceived inequalities in decision-making power (Kim, 2023). In Buea, most studies focus on larger corporations or developed economies, leaving a lack of localized research that addresses the unique socio-economic context of Buea. Furthermore, while some SMEs have attempted to implement structured frameworks for performance management, many lack the resources or knowledge to do so effectively (Nana et al, 2021).

Despite these challenges, there is limited empirical evidence examining how different organisational structures directly influence employee performance within SMEs in Buea. Existing studies primarily focus on broader trends without delving into localised contexts or specific structural configurations. This oversight creates a gap in understanding how organisational design can be tailored to meet the unique needs of SMEs operating in Buea. Furthermore, the controversies surrounding optimal organisational structures highlight the need for further research.

While some scholars advocate for flat structures as a means to enhance creativity and job satisfaction (Tschang, 2022), others caution against potential drawbacks such as role ambiguity and lack of accountability (Huang, 2020). This conflicting evidence underscores the necessity for context-specific investigations that consider local cultural dynamics and economic conditions. By addressing this gap, the study aims to provide valuable insights that can inform organisational design strategies tailored to enhance employee performance in this unique setting.

1.3 Research Questions

1.3.1 Main Research Question

What is the effect of organisational structure on employee’s performance in SMEs in Buea?

1.3.2 Specific Questions

1. How does flat structure affect employee’s performance in SMEs in Buea?
2. How does matrix structure affect employee’s performance in SMEs in Buea?
3. What is the effect of Hierarchical structure on employee’s performance in SMEs in Buea?

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