How Does Organizational Structure Affect Performance Measurement?

Businessman presenting data analysis dashboard on TV at meeting room. Concord
••• Ralf Hahn/iStock/GettyImages

Organizational structure defines the supervisory relationships, departmental structure and workflow within a company through human resource management.

Allocation of team members in this way affects decision-making and problem solving for performance measurement and employee performance for top management to see.

Performance management involves the systematic improvement of individual and team performance through goal-setting and regular performance reviews from Human Resources.

Performance management systems and policies can be greatly influenced by a company's organizational structure, and organizational performance goals can help to shape a company's structure, as well.

Understanding the interplay between these two concepts can help you to design the most effective performance management systems for your organizational structure, whether that be through centralization of management, questionnaires, or incentives for job satisfaction.

Structure and Performance

Organizational structure methodology focuses on the layout of departments and job roles in a company in the context of reporting relationships.

For strategic management of small business’s and big corporations alike, a company's structure can be drawn as a top-down flowchart, with each connected node representing a different position in the company that reports to the position above it and possibly supervises the positions directly below it.

Since organization performance revolves around the relationships between supervisors and their subordinates, organizational culture can provide guidance on which positions should include responsibility for monitoring and reviewing the performance of people in other positions.

This ideas and keywords can further be explored in the International journal of business by McGraw-Hill which provides metrics, case studies, and data analysis on the impact of organizational structure.

Reporting Relationships and Performance Reviews

Organizational behavior delineates who reports to and receives instructions from whom. This in turn affects the ways in which performance reviews are handled.

If your organizational structure features a tall hierarchy, for example, individuals are likely to work closely with a departmental supervisor who helps them to set performance goals and performs an annual review of progress toward those goals at least once per year.

If you have a flatter hierarchy, on the other hand, performance goals are more likely to be set by employees themselves, while 360-degree feedback is more likely to be used to monitor individuals' progress.

Design performance review policies around the structure of reporting relationships in your company to make individual performance feedback more relevant to organizational goals and thus result in a positive relationship with senior managers.

Team vs. Individual Performance

Organizational structure can influence whether performance-management systems focus on individual or team performance. Traditional departmental structures with redundant job roles can lend themselves well to individual specialization performance reviews.

In an accounting department with five accounts-receivable clerks, for example, it would be more logical to review each clerk's individual performance and contributions to the department than review the team as a whole.

In organizational structures featuring close-knit, cross-functional teams, on the other hand, it can be more meaningful to assess performance for the group as a whole.

In a team-oriented structure, managers must choose between using team performance to make decisions on individual compensation or to combine individual and group considerations to ensure fairness to top performers.

Remote vs. In-House Employees

The distribution of in-house and remote job roles in a company is defined by organizational structure, and it can impact a few practical considerations in performance management.

In many cases, remote or work-at-home employees can find themselves at a disadvantage in performance reviews.

It can be challenging to accurately track how much overtime a remote employee puts into a special project, for example.

Remote employees can find fewer opportunities to help others, provide strategic input in meetings, coach new employees and contribute to team cohesiveness -- all of which can influence the outcomes of performance reviews.

Remote employees can also struggle to keep up with new administrative policies as they evolve in the office, which can tarnish others' perception of quality in their work.

If you employ a large number of remote employees, design your performance review policies to work around these disadvantages by focusing on individual goals related to individual job roles.

Related Articles