Organisational Structure, Culture and Performance

Question

How does the relationship between organisational structure and culture impact on a business's performance?

Answer

There are a number of elements which can influence a company’s performance, including those of organisational structure and culture. Both of these elements have been found to directly influence the financial performance of a firm, as well as potentially improving customer related variables such as trust or loyalty (Kotter, 2008). A number of conceptual frameworks and academic theories have been presented on how to manage corporate culture, including Handy’s Four Types of Organisational Culture (1993), Hofstede’s Cultural Dimensions (1984) & the Denison Organisational Culture Model (1990). By effectively managing their corporate culture, an organisation can obtain the associated benefits, including increased financial and market performance. An organisations culture has been found to have particularly strong benefits within the service industry, whereby a positive corporate culture can improve service quality and customer satisfaction (Gebauer, et al., 2010). The organisational structure will have a large impact on the internal operations of a company, and must be tailored to support and sustain a positive corporate culture. There are a number of theories to support the creation of a strong organisational structure, including Bureaucratic Structures, Divisional Structures & Team Structures (Pleshko, 2007). Each of these structures can have a unique impact on the culture of a firm, and must be carefully managed by company executives in order to sustain a positive culture which is appropriate for the workplace. Through the adoption of an effective organisational structure that is tailored towards the company’s need, a positive culture can be created which promotes total quality and improved business performance (Nayager & Vuuren, 2015).

References

Denison, D. R., 1990. Corporate culture and organizational effectiveness. New York: Wiley & Sons. Gebauer, H., Edvardsson, B. & Bjurko, M., 2010. The impact of service orientation in corporate culture on business performance in manufacturing companies. Journal of Service Management , 21(2), pp. 237-259. Handy, C., 1993. Understanding Organizations. 4th ed. London: Penguin Books. Hofstede, G., 1984. Cultural dimensions in management and planning. Asia Pacific journal of management , 1(2), pp. 81-99. Kotter, J. P., 2008. Corporate culture and performance. New York: Simon & Schuster. Nayager, T. & Vuuren, J. J. V., 2015. An analysis of an organisational strategy, structure and culture that supports corporate entrepreneurship in established organisations. South African Journal of Economic and Management Sciences, 8(1), pp. 29-38. Pleshko, L. P., 2007. Strategic orientation, organisational structure, and the associated effects on performance. Journal of Financial Services Marketing, 12(1), pp. 53-64.