The Moderating Effect Of Decision-Maker On The .
International Journal of Innovative Research and Advanced Studies (IJIRAS)Volume 4 Issue 4, April 2017ISSN: 2394-4404The Moderating Effect Of Decision-Maker On The RelationshipBetween Strategy And Organizational StructureLevius Koyio MatsesheRobert. ArasaFaculty of Commerce, The Catholic University of EasterAfrica, Nairobi, KenyaTecle H. YohannesFaculty of Commerce, The Catholic University of EasterAfrica, Nairobi-KenyaAbstract: The purpose of this study was to establish the influence of the decision maker on the relationship betweenstrategy and organization structure. The study was informed by the apparent dearth of empirical evidence about the saidrelationships. Whereas the relationship between strategy and structure is rich in empirical data, the role of the decisionmaker in the process of structuring organizations has largely been underscored in theory that the process is neithernecessarily logical nor objective. The main objective of the study was to establish the influence of the decision-maker onthe relationship between strategy and organizational structure. The study was based on the cross-sectional surveytargeting all manufacturing firms in Nairobi and its surrounding. Data was initially analysed by exploratory andconfirmatory factor analysis tests, however, the final analysis was done using structural equation modelling. The findingsestablished significant influence of strategy on organization structure. Further, the findings provided evidence that thedecision maker has significant moderating effect on the relationship between strategy and organization structure in themanufacturing firms in Kenya. The study has thus yielded a high empirical validity for its theoretical model that was toestablish; the moderating effect of the decision-maker in the relationship between strategy and organization structures.Accordingly, the assumption held within the structure-contingency model that the linkage between strategy and structureis logical and direct is no longer tenable.Keywords: Decision-Maker, Strategy and Organizational StructureI.INTRODUCTIONStudies in organization design have been ongoing in thefield of management for many decades. All this while, therehas been very little change in the structural contingency theoryunderpinning these studies (Burton & Obel, 2004). Theinterest in these studies is sustained by the significantcontribution that organization structures make toorganizational performance. The organization structureinfluences amongst other functions how power, roles andresponsibilities are distributed, controlled, goals are achievedand how information flows throughout the organization. Thus,an appropriate organization structure is that which facilitateswhile an inappropriate one imbeds the attainment of thedesired results (Robbin & DeCenzo, 2005). Since strategicPage 381planning involves determination of goals and objectives, it iseasy to perceive why organization structure is often conceivedafter the strategy has been selected and the motivation behindsustained studies in strategy-structure relationship.The role of the decision-maker in the process ofstructuring organizations has been presumed by theproponents of the structural-contingency framework.Contingency variables such as strategy are all the importantdeterminants of organization structure (Oliveira & Takahasi,2012; Greenberg, 2011; Cole, 2004; Donaldson, 2001). Thus,the structural contingency framework assumes that theorganization structure directly and logically responds to thedemands of the strategy as one of the contingency factorsthereby failing to take into account the role of the decisionmakers. But factors do not by themselves choose organizationwww.ijiras.com Email: contact@ijiras.com
International Journal of Innovative Research and Advanced Studies (IJIRAS)Volume 4 Issue 4, April 2017structures, people do. The strategic choice approach whichargues that the process of structuring an organization isfundamentally a political one which is why decision makersplay an important role. Since most major corporate decisionsinvolve multiple decision makers, Child (1997; Child et al.,2003) discusses them in plural as those who have the power todirect organizations. The argument goes that it is theperceptions and preferences of decision-makers thateventually influence the choice of organization structurehaving considered the interplay amongst the contingencyfactors. Indeed this is what strategic choice is about, selection.Those who have the power to direct organizations are largelydefined as either; a leading coalition group within anorganization, executive manager or owners with executiveauthority. Such decision-makers are not homogeneous in theiroutlook and capability. It is the intervention of the decisionmakers between contingency factors and the resultantstructures that explain the existence of different organizationstructures even though the contingency factors may be thesame, a reality contingency framework can hardly explain.Since structure is subject to the decision-makers’ choice,some researchers and theorists have argued that structureresults from a decision problem (Powell, 2008; Child et al.,2003). Choice is hardly objective for it is a result ofperceptions and preferences be they managerial or otherwise.Decision-makers’ perceptions and preferences are nurtured bytheir (i) cognitive orientation, (ii) bounded rationality, and (iii)motivational orientation, (Currie, 2012; Mackinnon & Powell,2008; Beach & Connoly, 2005; Bubnicki, 2003). Boundedrationality holds that the ability of decision makers to perceivethe totality of their situation is limited by their worldview.Cognitive orientation relates to the information processingability of the decision maker. It holds that decision-makerswith different information processing ability may havedifferent perceptions of the same objective phenomena.Motivation orientation refers to system of values andevaluation in the process of individual or group choice. Forexample, choices may be made on the basis of personalcriteria or organizational criteria. When applied to theorganization structure, the decision-maker may choose astructure guided by personal criteria, organizational criteria ora concession of both which is why it may explain variancesthat exist in organization structures. Through their wish toadhere to industry success factors decision makers oftencomply in spite of their reading of contingency factors. As aresult, the firms in an industry tend to configure look-a-likestructures. Ultimately the emergence of new thinking demandsof managers to authenticate their interpretation of thecontingency factors (Childe et al., 2003).Strategy is variously defined by different authors but thereis unanimity on what the essentials are. Cooper & Schinder(2006) define it simply as the general approach that anorganization follows to achieve its goals. Pearce and Robinson(2012) consider strategy as the determination of the long-termgoals and objectives of an organization and adoption ofcourses of action and the allocation of resources necessary forcarrying out these goals. An organization structure is part ofthe organizing function that creates the mechanism thatcoordinates activities for the achievement of the planned goalsand objectives. It is logical that such a mechanism is createdPage 382ISSN: 2394-4404after the goals and objectives are known. This could be whythe classic works by Chandler (1962, 2003) contending thatstructure follows strategy generated a lot of interest resultingin numerous research studies around the world, Robbins(2004). Many of such studies augmented Chandler’sproposition (Hall & Tolbert, 2009; Miles et al., 2011). Manywriters argue that organizational structure has to change basedon the strategies that are being pursued.Although a lot of emphasis is given to strategy as one ofthe key determinants of structure, it is difficult to providepractical advice based on this understanding given the pace ofchange that is characteristic of modern times (Achaoucaou etal., 2009). It is this challenge that has sustained interest in theresearch strategy’s influence on organization structure. Thepresent study addressed this issue by examining the position ofthe decision-maker in the process of determining theorganization structure.OBJECTIVE OF THE STUDYThe main objective of the study is to establish theinfluence of the decision maker on the relationship betweenstrategy and organizational structureII. LITERATURE REVIEWThe study was guided by structure-contingencyframework and strategic choice approach. The determinationof organization structure based on structural contingencytheory rests on two fundamental premises namely that; (i)there is no optimal organizational form for all situations, and(ii) the alignment between organizational design and strategyleads to the most appropriate organization structure. On theother hand, the rationale behind the strategic choice approachis that factors do not choose but people do which is theprocess of choice can hardly be objective. Choices of strategyand structure by leadership of organizations are often lacedwith interests.A. THE CONCEPT OF ORGANIZATION STRUCTUREThere are many concepts and opinions on organizationstructure. To some structure is a sum total of the ways inwhich division of labour is achieved in an organization(Mintzberg, 2009). Others see the structure in the role that itplays in the attainment of set organizational goals (Robbin &DeCenzo, 2005). Contributing to the same concept, Mullins(2007) states that organisation structure defines tasks andresponsibilities, work role and relationships and channel ofcommunication. All these definitions point to the fact that,organisation structure entails the grouping of activities and thepeople that perform them into units that consolidate effort tobetter achieve respective organizational objectives. Writers onorganization design reveal the presence of various dimensionsor components of structure that have to be conceived whichare namely the degree of; complexity, formalization andcentralization (Robbins, 2004; Cole, 2004). Complexity refersto the level and extent of differentiation in terms ofdepartments and the chain of command, work specialization,www.ijiras.com Email: contact@ijiras.com
International Journal of Innovative Research and Advanced Studies (IJIRAS)Volume 4 Issue 4, April 2017product and market range. Formalization refers to the extentto which jobs are standardized and employees exercisediscretion on how to perform their jobs and conductthemselves. It is the degree of how rules, policies andprocedures regulate the people’s behaviour in theorganization. Centralization refers to the degree to whichauthority and decision-making is concentrated at the top(Quangyen & Yezhuang, 2013; Ugbomhe, et al., 2011; Stoner,et al., 2004). These dimensions need to blend for theorganization to work as effectively as possible. A combinationof these dimensions would produce a web of relationships thatmake up organization structural classifications that range froma continuum of mechanistic to organic structures (Lunenburg,2012; Cole, 2004). A mechanistic structure is highly formal,relies on authority and a well-defined hierarchy to facilitatecoordination. Its essence is to maximise efficiency andproduction. The organic structure on the other end is low oncomplexity and formalization and enhances participation indecision-making (Greenberg, 2011).B. THE STRUCTURAL CONTINGENCY THEORYStructural contingency theory holds that there is no onebest organization structure or structural type that is best for allorganizations. Instead, the structure that is most effective isthe one that fits certain factors, called contingencies. Thesefactors are to be found within (internal) and without (external)organization (Forte et al., 2000; Pettigrew et al., 2000;Donaldson, 2001; Meilich, 2006). A variety of contingencyfactors can explain variations in the forms of organizationstructures. The most prevalent set of internal factors to befound in the literature is strategy (Chandler 1962, 2003;Robbins, 2004; Cooper & Schindler, 2006). It is argued thatstrategy demands a structure that facilitates itsimplementation. Thus, depending on which strategy that ischosen then only particular forms of organizational structurethat bear specific set of features would be selected. Thus, theeffectiveness of an organization structure depends on theextent to which it fits the strategy. The structural contingencytheory which is the basis of this reasoning has triggered aseries of studies over the years. The works of Burns andStalker (1961), Child (1972), Chandler (1966), Mintzberg(1984), Lorsch (1977) and more recently Hollenbeck (2000),Nasrallah et al. (2009), Quangyen and Yezhuang (2013),Kariuki (2015) emphasize the need to study the influence ofcontingencies on organization structures. That as it may,structural contingency theory does not explain the process ofselection.C. STRATEGIC CHOICE APPROACHStrategic choice approach borrows from social actionapproach within sociology and strategic management theory toadvance the argument that leadership action can impact uponorganizations and its performance (Child et al., 2003). Anestablished notion in strategic management is that managerscope with changes in their firm’s external environmentthrough the choice of strategies and corresponding structures.The range of actions available to organization leadership isbroad. For instance, there is an array of strategies andPage 383ISSN: 2394-4404structural typologies that leadership can select from.Proponents of strategic choice take the view that organizationstructure is a function of managerial choice. They argue thatdecision makers come between the contingency factors andstructure. Rather than treat structural differences as the resultof a clear contingency factor influence, such differences haveto be viewed as the outcome of a process related to those withthe power to structure organizations. The key strategicdecision makers in organizations have been found to be mostlyexecutive managers and/or owners (Child et al., 2003; Child1997).D. EMPIRICAL REVIEWSeveral studies have found that the co-alignment betweenstrategy, structure and environment is a necessary conditionfor firm performance (Chathoth, 2002; Chiyoge, 2009;Krishna & Shubhabrata, 2015). A study on effects oforganization structure on strategy implementation ofmanufacturing firms in Nakuru, Kenya found strongcorrelation of division of tasks and formalization on strategyimplementation (Karani, 2013). Thus, strategy-structure matchis an important relationship. When a company diversifies,there is a decline in the performance if a suitable structure isnot adopted. Such decline in performance forces themanagement to adopt an appropriate structure suitable to itsstrategy. Performance is enhanced when a match is finallyrestored between strategy and structure. This is a commonunderstanding amongst researchers.The underlying issue here is that strategy plays a majorrole in determining organizational form or structure, and thatthis interaction has greatly influenced configuration literature.Even greater is the realization that although strategy is thedriving force, it is the interaction of strategy and structure - fitor configuration-that often truly makes the difference (Burton& Obel, 2004). Karani (2013) found that divisions of tasks andlevel of formalization, which, are some of the dimensions oforganization structure significantly, affected how strategy isimplemented.On the other hand, some studies have shown that theaspects of organization structure that impact control functionsuch as the degree of centralization, standardization anddifferentiation are the most influenced by the decision makers(Hollenbeck, 2002; Jabnoun, 2005; Auh & Mengue, 2007).There is also an observation that centralization is one of themost broadly studied aspects of organization structure(Hollenbeck, 2000). Decision-maker’s choice tends to beimportant because this is the aspect of a vertical structure thataffect the extent to which decision making authority andresponsibility for coordination resides at the top of theorganization as opposed to being distributed throughout thelower levels.Similarly, it is argued that the decision-maker tends tochoose organization structures that support their view ofoperational efficiency or interests (Jabnoun, 2005). The studyby Jabnoun (2005) identified that decision-maker who sortorganization structures that supported the implementation ofcustomer oriented total quality management, preferredstructural dimensions of process network and organicstructures. On the other hand, decision-makers who tended towww.ijiras.com Email: contact@ijiras.com
International Journal of Innovative Research and Advanced Studies (IJIRAS)Volume 4 Issue 4, April 2017be relatively more risk averse preferred mechanistic structures.This finding resonates with what other studies found(Hongyan et al., 2015; Delios et al., 2008; Douma et al.,2006).Other studies, though not purely focused on organizationstructure confirm that ownership type influence overallstrategic decisions and therefore organizational performance.For incidence, it is typically believed that private owned firmsare more well-organized than state owned firms, while mixedowned firms fall in the between (Shaomi & Jun, 2008; Doumaet al., 2006). It has also been established by some authors thatsometimes mixed owned firms perform better than a unitaryowned firm where market imperfection is significant(Zhixiang & Kim, 2013; Sing, 2009).Evidently, strategy and structure relationships have beenextensively researched and written about. Not so, the processof how nor who takes the decision of how strategy shouldinfluence structure. The assumption is typically made that atype of organization structure is more favourable for a givenstrategy to achieve alignment. This study sort to test theveracity of this assumption.III. METHODThis study adopted a cross-sectional survey researchdesign because it facilitated the collection of data from manydifferent firms in a variety of industries but in one sector atone point in time (Kerlinger, 2007). The population of thestudy consisted of all manufacturing firms in Nairobi and itssurrounding, which are members of Kenya Association ofManufactures. The choice of the manufacturing sector wasinformed by the evidence from the past studies that; (i) themanufacturing sector is sensitive to contingency factors and,(ii) significant number of past studies on environment, strategyand structure were mostly based on the manufacturing firms(Zsolt, 2012; Quangyen & Yezhuang, 2013; Busienei et al.,2013; Karani, 2013; Kariuki, 2015; Chindia & Pokhariyal,2015). There are a total of five hundred and nine (509) of suchfirms in thirteen industries according to the Kenya Associationof Manufacturers (2015). The entire population of fivehundred and nine (509) manufacturing firms were involvedbecause the population of the study was fairly small andassurance was needed to obtain adequate number of responsesrequired for the structural equation modelling (SEM) analysis.Structural equation modelling requires a large sample (Kline,2011).A. SAMPLE SIZEAccording to Zikmund et al., (2010), a sample size shouldbe sufficiently large as to allow high statistical efficiency ofthe method of analysis adopted for the study. For this study arule of thumb concerning the ratio of sample size to modelparameters developed by Jackson (2003) was used todetermine the sample size. This rule is applicable when theestimation method is maximum likelihood. In maximumlikelihood estimation, Jackson (2003) suggested thatresearchers think about minimum sample size in terms of theratio of cases (N) to the number of model parameters thatPage 384ISSN: 2394-4404require statistical estimates (q). An ideal sample size-toparameters ratio would be 20:1. Less ideal would be an N: qrat
Levius Koyio Matseshe Faculty of Commerce, The Catholic University of Easter Africa, Nairobi, Kenya Robert. Arasa Tecle H. Yohannes Faculty of Commerce, The Catholic University of Easter Africa, Nairobi-Kenya tudy was to establish the influence of the decision I. INTRODUCTION Studies in organization design have been ongoing in the
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Le genou de Lucy. Odile Jacob. 1999. Coppens Y. Pré-textes. L’homme préhistorique en morceaux. Eds Odile Jacob. 2011. Costentin J., Delaveau P. Café, thé, chocolat, les bons effets sur le cerveau et pour le corps. Editions Odile Jacob. 2010. 3 Crawford M., Marsh D. The driving force : food in human evolution and the future.
