What Is the Relationship between Organizational Structure and Performance?

Geri Terzo

Organizational structure and performance share a relationship in which the former can dictate or at least affect productivity. Different structures might be more appropriate for businesses based on the size of an entity or the industry in which a company operates. Employees often become a product of the organizational structure practiced at a business and begin to behave and operate in a manner that reflects and ideally supports the framework implemented by employers.

A company's organizational framework usually influences its employees attitudes and productivity.
A company's organizational framework usually influences its employees attitudes and productivity.

Understaffed companies might require that individuals wear many hats, that is, perform multiple tasks that are associated and nonassociated with a job title. It may be in order that a business continues to operate as though it were fully staffed even though it is not. This is not the case in a company that has a functional organizational structure.

Understaffed companies might require that individuals wear many hats.
Understaffed companies might require that individuals wear many hats.

A functional environment is one where individual employees are given specific tasks under the umbrella of a division with a broader organizational purpose. These individuals are expected to perform in line with defined parameters. While there may always be a plausibility for crossover between divisions as projects emerge and individuals miss work, the roles and job functions remain segregated and defined. The link between organizational structure and performance here is that employees are likely to become increasingly proficient at their work because of the clarity and repetition assigned to tasks. Also, individuals may have little recourse if productivity is lagging because the goals are clear as implemented by the employer.

A small company is more prone to adopt a flat organizational structure. This is in part due to practicality as this type of environment is shaped by a somewhat limited staff. Employees often work under the direct leadership of the owner or operator of the company in contrast to being managed by departmental or middle-management executives. In this setting, organizational structure and performance are linked because employees are aware that upper management is cognizant of individual performance. This could affect productivity in a positive way and inspire participation among coworkers.

In a matrix organizational structure, there is less formality to the roles attached to job titles. Companies that create this environment are likely to promote teamwork and the blending of different office divisions for a purpose. Organizational structure and performance are linked in this setting as employees are encouraged or rewarded for demonstrating an entrepreneurial spirit and creativity as they work with one another to complete a certain goal. Conflict could arise in team environments if employees resist different management styles of individuals from outside departments.

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Discussion Comments


@feruze-- I don't agree. I don't think performance only means how much or how well people work, but also if their work is aligned with the goals of the organization they work for. This is what structure and performance means to me.

When employees align all of their efforts with the goals of the organization, the overall performance of that organization improves and it reaches its goals more quickly.


I think the relationship between organizational structure and performance is only important in the private sector. Structure is important in the public sector, but performance really isn't.


Organizational structure is definitely important for employee performance. How the hierarchy within an organization is set up will affect how well people are able to do their job.

But I also think that any limitations and difficulty created by organizational structure can be overcome if there is good leadership within an organization.

In the company I work for, the organization structure is very rigid. It's not easy for employees to communicate with employers and receive feedback. But we have a great manager in our department who works around the structure and puts in a lot of effort to communicate with us.

He doesn't treat us as inferiors but rather as friends. He asks for our opinion and includes us in brainstorming sessions. Ever since this manager has arrived, our performance as a department has greatly improved.

So I don't think that the limitations of organizational structure should be an excuse for employers for employee performance.

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