THE EFFECTS OF ORGANIZATION STRUTURE ON THE PERFORMANCE

OF FINANCIAL INSTITUTIONS: A CASE STUDY OF KENYA COMMERCIAL

BANK, KISUMU BRANCH

BY
BRENDA ACHIENG
DSEC/0019/21

A RESEARCH PROJECT PROPOSAL SUBMITTED TO THE KENYA

NATIONAL EXAMINATION COUNCIL IN PARTIAL FULFILLMENT
OF THE REQUIREMENTS FOR THE AWARD OF DIPLOMA IN
SECRETARIAL STUDIES

MARCH, (2023)
 DECLARATION
Declaration by the candidate
I Brenda Achieng declare that this research project proposal is my original work and it
has never been presented in any institution for the ward of any degree or Diploma.

Sign…………………………….. Date………………
Brenda Achieng
DSEC/ 0019/21

Declaration by the supervisor

This research project proposal has been submitted for examination with my approval as
the candidate’s research supervisor.

Sign…………………………….. Date………………
Ms. Veronica Adera
Research Supervisor
SIT

ii
 DEDICATION
This research proposal is dedicated to my parents, brothers and sisters.

iii
 ACKNOWLEDGEMENT
I am very grateful to my research supervisor Madame Veronica Adera for her guidance
and support. Gratitude also goes to the management and staff members of SIT for having
provided a conducive environment and knowledge that was very instrumental in the
drafting of the project. I would also like to thank the management and staff of KCB
Kisumu branch whose participation will contribute to the success of the project.

iv
 ABSTRACT
The study will be on the effects of organization structure on the
performance of business organizations. It will be done in Kenya
Commercial Bank. The objectives of the study will be, to establish how
organization structure affects delegation, leadership, communication and
values. This study will yield data and information that will be very useful
for proper planning and decision making for management actions for
change and development of effective and efficient organizations which
will always attain their goals and performance. The findings and
recommendations too will be very useful for the Managers and the
Administrators of most organizations thus they will not rely on haphazard
personal experiences or subjective expert judgments, or on traditions or
fashion in their management tasks but base their methods, decisions and
actions on concrete knowledge of issues of the organization’s firms
supported by research findings. This study will enable the improvement of
the organizations internal efficiency and help re-invent them as centers for
business orientations which thus attain its goals and performance. Thus,
the researcher hopes that the study will form a basis for further research
on the Organization management of most business organizations in
Kisumu city which will then lead to generation of ideas for the better
management of most business organizations within Kisumu city and the
rest of the world. The researcher will use descriptive research design. The
sample will be selected using simple random sampling. Data will be
collected using questionnaires. It will be analyzed using descriptive
statistics. It will then be presented in tables, pie charts and graphs

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 TABLE OF CONTENTS
TITLE PAGE……………………………………………………………. i
DECLARATION………………………………………………………... ii
ACKNOWLEDGMENT………………………………………………… iii
ABSTRACT……………………………………………………………... iv
TABLE OF CONTENTS………………………………………………... v
LIST OF TABLES………………………………………………………. vi
LIST OF FIGURES……………………………………………………... vii
LIST OF ABBREVIATIONS AND ACRONYMS…............................... viii
OPERATIONAL DEFINITION OF TERMS………………...…………ix

CHAPTER ONE
INTRODUCTION TO THE STUDY
1.1 Introduction........................................................................................... 1
1.2Background of the Study……………………........................................ 1

1.3Statement of the Problem………............................................................ 3

1.4Research Objectives……………………………………………………..4
1.5Research Questions ……………………………………………………..4
1.6Significance of the Study……………………………………………….. 5
1.7Limitations of the Study…………………………………………………5
1.8Scope of the Study……………………………………………………… 5

CHAPTER TWO
LITERATURE REVIEW
2.1: Introduction…………………………………………………… ……...7
2.2: Review of Theoretical Literature…………………………………….
2.3 Critical/ Analytical Review and Gaps……………………………17
2.4 Summary …………………………………………………........... 18
2.5: Conceptual Framework………………………………………………………..
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 CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.1Introduction……………………………………………………………..19
3.2Research Design………………………………………………………...19
3.3Target Population……………………………………………………… 19
3.4Sampling Design..........................……………………………………….19
3.5Data Collection Instruments and Procedures……………………………19
3.6 Validity and Reliability …………………………………………………24
3.7Data Analysis Methods……………………..............................................20

REFERENCES…………………………………………………………….21
APPENDICES
Appendix 1 Questionnaire
Appendix 2 Budget
Appendix 3 Work plan

LIST OF TABLES
vii
Work plan

Budget

LIST OF FIGURES
viii
Conceptual framework………………………………………………………….6

LIST OF ABBREVIATIONS AND ACRONYMS

ix
CEO Chief Executive Officer

IBM International Business Managers

CO Company

SIT Siaya Institute of Technology

K.C.B Kenya Commercial Bank

E.G. Example

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 OPERATIONAL DEFINITION OF TERMS

Organization Structure- A structure of relationships in an organization

Culture – The way things are done in an organization

Performance –The degree to which the organization is working towards the achievement
of its objectives

Structure- The way in which an organization’s activities are divided, organized and
coordinated.

Leadership refers to a rational process through which one person influences the
behaviour opinions, perceptions, decisions and actions of other people towards some
specific direction to achieve desired goals

Communication refers to the sending and receiving of message by means of symbols.

Values refer to the acceptable standards which govern the behaviour of individuals
within the organization.

Feedback - means an instant response.

Risk - Represents the degree of uncertainty in the organization’s activities.

Delegation – This is the passing of duties, responsibilities and authority to other

members of staff

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xii
 CHAPTER ONE
INTRODUCTION TO THE STUDY
1.1 Introduction
This chapter handles the background of the study, statement of the problem,
research objectives, research questions, significance of the study, limitations of
the study and scope of the study.
1.2Background of the study
Structure is the pattern of relationships among positions in the organization and
among members of the organization. Structure makes possible the application of
the process of management and creates framework of order and command
through which the activities of the organization can be planned, organized,
directed and controlled, (Allaire and firsirotu 1984). Structure is highly needed in
the big size organizations as compared to the small sized organization, thus in big
firms there is need for a formal Organizational structure, and there is also need
for a continual review of structure to ensure that it is the most appropriate form
for the particular organization and in keeping with its growth and development.
Mugenda, (2003), The objectives of organizational structure are the economic and
efficient performance of the organization and the level of resource utilization;
monitoring the activities of the organization; accountability for areas of work
undertaken by groups and individual members of the organization; co-ordination
of different parts of the organization and different areas of work; flexibility in
order to respond to future demands and developments and to adapt to changing
environmental influences and the social satisfaction of members working in the
organization, (Becker and Geer 1960). Good organizational structure does not by
itself produce good performance. But a poor organization structure makes good
performance impossible, no matter how good the individual manages may be.
Thus, an improved organizational structure will therefore improve performance,
Drucker (2000).

1
The allocation of responsibilities, the grouping of function, decision-making, co-
ordination, control and reward are all fundamental requirements for the continued
operation of an organization. The quality of an organization’s structure will affect how
these requirements are met, Child, (1998). The structure of an organization affects not
only productivity and economic efficiency but also the morale and job satisfaction of the
workforce. Structure is an essential feature of the learning organization and
empowerment, and must be responsive to the changing environment. Structure has been
divided into the technical level, the managerial level and the Community level, Mugenda,
(2003). The technical level is concerned with specific operations and discrete tasks, with
the actual job or tasks to be done and with performance of the technical function. For
example the physical production of goods in a manufacturing firm; administrative
processes giving direct service to the public in government departments; the actual
process of teaching in an educational establishment , Child, (1998).The managerial Level
or organizational level is concerned with the co-ordination of and integration of work at
the technical level, whereby decisions will be concerned with mediating between the
organization and its external environment, such as the users of the organizations products
or services and the procurement of resources and the administration of the internal affairs
of the organization including the control of the operations of the technical function,
Drucker (2000).The Community level or Institutional Level is concerned with broad
objectives and the work of the organization as a whole. Thus, selection of operations, and
the development of the organization in relation to external agencies and the wider social
environment e.g., Board of directors of joint stock companies; governing bodies of
educational establishment which includes external representatives; and trustees of non-
profit organizations. They do provide a mediating link between the managerial
organization and co-ordination of work of the technical organization and the wider
community interests Mugenda, (2003).

With the realization of the importance of performance and learning, organizations

have begun looking at how to improve organizational structure which refers to a

2
pattern of relationships within an organization, (Becker and Geer 1960). It is a
set of understanding or meanings shared by a group of people that are largely
tactic among members and are clearly relevant and distinctive to the particular
group which are also passed on to new members, (Louis 1980). Organization
culture is a system of knowledge, of standards for believing, perceiving,
evaluating and acting that serve to relate human communities to their
environmental settings, (Allaire and firsirotu 1984).

Organization culture is the deeper level of basic assumption and believes that are:
Learned responses to the group’s problems of survival in its external environment
and its problems of survival in its external environment and its problems of
internal integration; are shared by members of an organization; that operates
unconsciously; and that define in a basic “take –for- granted” fashion, an
organization’s view of itself and its environment, (Schein 1988). Organization
culture is also defined as any social system arising from a network of shared
ideologies consisting of two components: substance- the networks of meaning
associated with ideologies, norms and values; and forms – the practices whereby
the meanings are expressed, affirmed and communicated to members, (Trice and
Beyer 1984).

Organization culture is an idea in the field of organizational studies and

management which describes the psychology, attitudes, experiences, believes and
values (both personal and cultural values) of an organization. It has been defined
as the specific collection of values and norms that are shared by people and
groups in an organization and that control the way they interact with each other
and with stakeholders outside the organization, (Wikipedia the free
encyclopedia). Organization culture has an impact on the performance of the
organization. What is “business performance”? The enterprise performance is
generally defined as “the activity of providing goods and services”. The definition
shows that the business has two components, that is, the activity, which is
3
business performance, and the goods and services which are business results.
Therefore, business performance improvement must improve the capital utilized
in performance solutions. Business performance is improved in order to improve
enterprise goods and services and other output business results produced by the
business performance. In this study, organization structure, organization
leadership, organization communication, Norms and values, characterize the
organization performance. By organization leadership the researcher refers to a
rational process through which one person influences the behaviours opinions,
perceptions, decisions and actions of other people towards some specific direction
to achieve desired goals. By organization structure the researcher refers to the
way in which an organization’s activities are divided, organized and coordinated,
(Wikipedia the free encyclopedia). It is division of work among members of the
organization and coordination of their activities so that they are directed towards
the goals and objectives of the organization. Organizational communication
refers to the sending and receiving of message by means of symbols. It is the key
element of organizational climate, Drenth et al (1998). Myers and Myers, (1982)
define organizational communication as the central binding force that permits
coordination among people and thus allows for organized behaviour.
Organizational values refer to the acceptable standards which govern the
behaviour of individuals within the organization. Without such values,
individuals will pursue behaviours that are in line with their own individual value
systems, which may lead to behaviours that the organization doesn't wish to
encourage. Clearly, the organization's values must be in line with its purpose or
mission, and the vision that it is trying to achieve. So, to summarize, articulated
values of an organization can provide a framework for the collective leadership of
an organization to encourage common norms of behaviour which will support the
achievement of the organization's goals and mission.

1.3 Statement of the problem

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Businesses have developed traditional ways of operations and administration over the
years. Practices and methods are installed to meet the preferences of a certain manager at
a certain time. They then become the set way to operate. Successive processes and
systems are implemented and adapted so that people do not change the way they do
things. The fundamental problem is that business performance structures are overlaid on
the business, rather than directly managing business performance in the performance
solutions utilized to produce business results. Business processes are re-engineered to
improve business performance and performance quality. Business process re-engineering
focuses on defining the process that is overlaid on the business to produce an output
result from the process, but does not organize the business to produce output results from
the business. Business process management manages quality checkpoint or other
contrived methods to manage performance quality, but does not manage the performance
of capital utilized within the process. Enterprise information systems are implemented
through conversions as additional overlays on the business, without positive business
change. Some transactions are still performed manually or on PCs and the database are
not authoritative for the enterprise. The business environment changes but the business
traditions or culture remain sacred. Enterprises organize by function to perform similar
tasks rather than organizing to achieve important results. Performance reporting measures
level of activity rather than real results. The function is the driver of business practices
and methods. Few business functions are directed towards their internal or external
customer.

Functions are performed whether they are important to the core business or not.
Enterprises say they can not apply package systems because their business is too
complicated, as though a complicated business is good. They do not simplify their
business to use the packaged system. Enterprises rarely evaluate the cost and benefit of
the existing way of doing business. In many enterprises, business processes are re-
engineered without changing the functional empire or considering enterprise system
needs.

5
Business change is the responsibility of the consultants or change team, rather than the
line management. Much business change ends up being cosmetic, rather than addressing
the fundamental hard-to-solve problems. Over the years, the cost of business change
multiplied while the benefits remained marginal.

1.4 Research Objectives

General Objective
To find out the effects of organization structure on the performance of
businesses, a case study of KCB Bank Kisumu

Specific Objectives
6
 i. To investigate the effects of organization structure on leadership in KCB Kisumu.
ii. To determine the effects of organization structure on the values of KCB.

iii. To find out the effects of organization structure on communication in KCB

Kisumu.

1.5 Research Questions.

The questions that will be answered in this study will be: -

i. How does organization structure affect leadership in KCB Kisumu?

ii. In what ways does organization structure affect organizational values in KCB
Kisumu?

iii. What are the effects of organization structure on communication in KCB

Kisumu?

1.6 Significance of the Study.

Kisumu City is a developing town whereby most organizations for example Banks,
Institutions that is Universities, Real Estate Developers, Agricultural firms are opening
most of their branches, thus it is hoped that this study will yield data and information that
will be very useful for proper structuring and decision making for management actions
for change and development of effective and efficient organizations which will always
attain their goals and performance. The findings will assist managers to develop and
maintain good organization structures. The findings and recommendations too will be
7
very useful for the Managers and the Administrators of most organizations thus they will
not rely on haphazard personal experiences or subjective expert judgments, or on
traditions or fashion in their management tasks but base their methods, decisions and
actions on concrete structures. This study will enable the improvement of the
organizations internal efficiency and help re-invent them as centers for business
orientations which thus attain its goals and performance. Thus, the researcher hopes that
the study will form a basis for further research on the Organization management of most
business organizations in Kisumu city which will then lead to generation of ideas for the
better management of most business organizations within Kisumu city and the rest of the
world.

1.7 Limitations of the study

The employees of K.C.B Bank may not disclose information which they consider
confidential. The findings of the study may not be generalized to financial institutions in
more developed countries because they have different organizational structures due to
their level of development. The management of K.C.B bank may doubt the intentions of
the researcher. The researcher will counter this by availing the student’s identity card and
letter of authority from Siaya Institute of Technology.

1.8 Scope of the study

The study will be on the effects of organization structure on the performance of financial
institutions. It will be conducted between March 2023 and June 2023. The study will be
conducted in K.C.B Kisumu branch which has a population of 50 employees. The
concepts that will be dealt with include organization structure, communication,
delegation, allocation of resources and co ordination

8
 CHAPTER TWO

2.0 LITERATURE REVIEW

2.1 Introduction

This chapter discusses literature pertaining to Organizational structure, Organizational

Values, Organizations Communication, and Organizations Leadership, delegation and
allocation of resources

2.2 Review of Theoretical Literature

2.2.1 The effects of organization structure on Organizational Leadership

This is a relationship through which one person influences the behaviour or actions of
other people. The role of leadership is often misunderstood. It's worse when things go
wrong or do not look stellar in the short-term; all too often we criticize, condemn and
chastise those in charge. A true leader's job is to get the organization humming, to get it
operating at high efficiency in order to meet both its short-term and long-term goals
(Schein 1988). A leader must also understand that the buck stops with them, and

9
excuses, blame games or failure are not options, they are totally unacceptable. A leader
must be a visionary and get the team on board to become one with that vision, motivating
everyone to put in their best efforts, even go beyond, then harvest that synergy and foster
that inertia. Mugenda, (2003),

To achieve this; a leader must understand the human element involved, including their
own, and carefully watch the details every step of the way. A strong leader must know
whom they can trust, seek reliable information and make decisions, often without
hesitation that will have an overall effect on the direction, speed and all other future
decisions. Obviously, this is no easy task. (Trice and Beyer 1984). In a large complex
organization and environment only a 100% fully engaged human leader can hope to
achieve these lofty requirements to fulfill their duties. Thus, leadership is not for
everyone, and leadership is one with responsibility. A leader must be able to lead with
agility, recover from mistakes from within the organization or their own mistakes;
perseverance, strength of character, and boldness are therefore often key components.
(Wikipedia the free encyclopedia). When leaders fail and there are so many ways to fail,
the organization can go through chaotic gyrations and recover, or even come apart and
self-destruct from within. When that happens, everyone loses, and if that organization is a
company or large corporation, failed leadership will determine the untimely and
unfortunate fate of all the vendors, lenders, customers, and employees. Too, the vendors,
lenders, customers, shareholders, regulators, employees must be on board and in it to win
it, one with the goals, objectives and vision of the company. It is up to the leader to see
that all this is working like a fine Swiss Watch. In practice however, it is not the
attainment of perfection in processes that must be sought, rather the agreement by all
players to move in that direction while achieving the goals. Flexibility, agility and the
ability to adapt swiftly are what the leader must strive for while they motivate the team to
work together and put in their best efforts. With such a responsibility demanded, it
behooves us to choose our leaders wisely, or we've already sealed our fate. Think on this.
(Wikipedia the free encyclopedia).

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Leadership traits include being a good follower, being self-motivated, being a good
communicator. A good team leader is a good follower. After all, how can your team look
up to you if you yourself don't have any respect for the authority? You're supposed to be
the prime example of how a person should behave. Besides, there are certain disciplines
that come with being a good follower. For example, a manager who has gone through the
hardships of serving coffee at a popular coffee ship will be able to immediately pinpoint
his team's weakness (if any) and how the overall operation can be improved, as opposed
to someone who has never even made coffee. Knowing what your followers are going
through makes you all the more effective as a team leader. What makes a good team
leader is self-motivation. Nobody's going to mollycoddle when your team starts
operation. Nobody's going to be there to hold your hand and uplift your spirits. . Darr,
Eric and Terri Kurtz berg (May 2000

That's your job! You're the one who always needs to be motivated so that you, in turn,
can motivate your team. Good communication makes a good team leader. It's a two-way
street. You have to know how to give out orders clearly and efficiently. Should you fail to
do this, your operation will most likely end up half-baked. And who do you think will be
responsible for that? On the other hand, you also have to know how to listen well. Your
team might have ideas that are worth listening to. Or they might have something
important to say. Being a good listener enables you to understand where each member of
your team is coming from and how they think. Knowing what makes a good team leader
is just the first step. Applying these principles into your everyday life is another. There
are times when being a good leader can be trying. But that's all part of the process.

Leaders don't live like kings because they're too busy making sure that their team is
operating like a well-oiled machine. However, effective leaders are also greatly rewarded
for all their hard work. The first element of leadership is the ability to show a desirable
future to his or her followers. Sometimes, this is called vision but it has become such an
overworked word that it has lost its meaning. You'll see company vision statements and
mission statements plastered on the walls of various organizations. Regrettably, these do
not translate into actions. As part of showing a desirable future to followers, a leader also
11
shows the direction. The view of the future is basically a positive image of what the
organization could become. The direction is the path that will lead to the objective. Darr,
Eric and Terri Kurtz berg (May 2000

The second element of leadership is the use of the leader's emotional intelligence and
interpersonal skills to motivate and inspire his or her followers. The leader presents
information in such a way that followers can see how they will benefit from both the
journey and the end destination. They are excited and inspired to be successful. The third
element of leadership is the wave of energy and enthusiasm generated by the leader to
infect the rest of the people. This infectious energy is directed towards followers but also
serves to keep the project on course towards the objective. These three essences of
leadership work well for the small organization and small teams as well as the large
corporation. True leaders deliver these three parts of leadership consistently and
powerfully.

Normally, leaders start with the first element and work from there. Showing a desirable
future is not very easy. It has to guide a team or an organization and it must be credible.
The job of the leader is to show a desirable future and desirable future should be designed
not just by one person. If it is a collaborative objective, it will be much more effective.
People will buy into a future that they have contributed to. The more they contribute to it,
the greater their passion. Without a doubt, the passion of a leader is one of the greater
motivators for the followers. Darr, Eric and Terri Kurtz berg (May 2000). There is little
point in trying to develop the other two elements unless the first element, the future, the
hope is clearly established and considered worthwhile by all concerned. Too many people
have been promoted to leadership positions and tried to change too many things, too
quickly and substantially failed to achieve much. The leader must take this desirable
future and show his or her followers to their contribution to the success of achieving the
goal. If the follower can see the link between their daily effort and the ultimate
achievement, they will be highly motivated to contribute as much as possible.

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Leadership styles include authoritative/autocratic, democratic/participative, laissez-faire
or free reign, servant leadership and bureaucratic leadership Almeida, Paul and Bruce
Kogut (July 1999). Authoritarian or autocratic is the commanding style—“Do as I say,
because I am the boss.” This style is based on the power of the position. Democratic or
participative (sometimes called authoritative) is the style that includes participation and
greater equality between leader and followers. This leader asks, “What do you think?”
and may make some decisions by majority rule. Laissez-faire or free reign is unengaged
in leadership, and simply lets people do their own thing with the leader exerting few
controls.

The free reign style can be good or bad, depending on whether the followers are high
performers or not. Good performers need free reign to perform best, but for beginners and
marginal performers this style is completely ineffective. Darr, Eric and Terri Kurtzberg
(May 2000). The style called servant leadership is based on a term coined by Robert
Greenleaf in the 1970s. This refers to anyone (whether having a formal leadership title or
not) who leads by meeting the needs of others or of his or her team. This leadership style
is based on strong values and personal integrity. It’s quiet, without fanfare. Bureaucratic
leadership can be defined as “by the book” leadership. This leader focuses on policy and
procedures and seeks to keep things fair and well-organized.

2.2.2 The effects of organization structure on organizational values

Organizational values define the acceptable standards which govern the behaviour of
individuals within the organization. Without such values, individuals will pursue
behaviors that are in line with their own individual value systems, which may lead to
behaviors that the organization doesn't wish to encourage. In a smaller, co-located
organization, the behaviour of individuals is much more visible than in larger, disparate
ones. In these smaller groups, the need for articulated values is reduced, since
unacceptable behaviors can be challenged openly. However, for the larger organization,
where desired behaviour is being encouraged by different individuals in different places
13
with different sub-groups, an articulated statement of values can draw an organization
together, Darr, Eric and Terri Kurtz berg (May 2000). Clearly, the organization's values
must be in line with its purpose or mission, and the vision that it is trying to achieve. So
to summarize, articulated values of an organization can provide a framework for the
collective leadership of an organization to encourage common norms of behaviour which
will support the achievement of the organization's goals and mission.

Five ways to live out values are to communicate the values constantly, enroll new folk,
revisit and refresh the values confront contradictory behavior and periodically check out
with feedback. Almeida, Paul and Bruce Kogut (July 1999). However, just as with a
mission or vision statement, it is one thing to have a written guide to an organization's
values that remains on the wall, or in a folder, but it is quite another thing to have living
values which shape the culture - the way that things get done. Values should fit with the
organizations' communication, both internally and externally. If we say that we're fun,
team-oriented where everyone counts, then having a traditional style with a photo of the
CEO may challenge this. Refer frequently to the values in talks and sermons, in articles
in internal/parish magazines. Acknowledge and thank those people who have achieved
something which particularly emphasizes the values. Polanyi and Michael (1958)

The values should be explicitly available as new members join an organization. If your
organization is a business, this can be a part of the selection process, if a church, and then
explicitly stating the values of the church creates an expectation in the minds of
newcomers. The church then needs to deliver on that! Almeida, Paul and Bruce Kogut
(July 1999). Revisit your values periodically - allowing members to update them. This
has the power of enrolling those who have joined the organization recently, and avoids
the stated values no longer reflecting the business culture. If people are allowed to live
out contradictory values, then over time there is a clear danger that these will usurp the
desired values, particularly if it is the more dynamic, dominant individuals who are
espousing the contradictory values. Ask people what they think are the values of the
organization - not only members, who may be influenced by the stated values, but
outsiders - observers, customers, former members.
14
2.2.3 The effects of organization structure on organizational communication

Organizational communication refers to the study of how people communicate within an

organizational context, Polanyi and Michael (1958). Organizational communication can
include flow of Communication which include formal or informal, internal or external,
upward, downward or horizontal and networks; Induction which include new hire
orientation, policies & procedures and employee benefits; Channels which include
electronic media such as e-mail, intranet, internet, Teleconference, Print media such as
memos, bulletin boards, newsletters and Face-to-face; Meetings which include
briefings ,staff meetings project meetings and town hall meetings and interviews which
include Selection ,Performance and Career. Jensen, Michael and William Meckling
(1976).

According to Brasmen et al, (1999) there are differences between formal and informal
communication. Formal Communication takes place through the formal channels of the
organization structure along the lines of authority established by the management. Such
communications are generally in writing and may take any of the forms; policy; manuals:
procedures and rule books; memoranda; official meetings; reports, etc. Formal
communication has its Advantages & Disadvantages. The advantages of formal
communication are that it helps in the fixation of responsibility and in the maintaining of
the authority relationship in an organization. The disadvantages of formal communication
are that it is generally time consuming, cumbersome and leads to a good deal of distortion
at times. According to Eric et al, (May 2000). Informal communication arises out of all
those channels of communication that fall outside the formal channels.

15
They are built around the social relationships of members of the organization. Informal
communication does not flow lines of authority as is the case of formal communication.
Xenikou, Athena and Adrian Furnham (1996) it arises due to the personal needs of the
members of an organization. At times, in informal communication, it is difficult to fix
responsibility about accuracy of information. Such communication is usually oral and
may be covered even by simple glance, gesture or smile or silence, Jensen, Michael and
William Meckling (1976). Essentials of effective communication include; the idea to be
communicated should be clearly formed and the facts and figures centering on that idea
should be formulated in positive and precise terms; communication will have the desired
response if involves participation of others concerned with the contents of the message;
communication should not be offensive in content and high handed in its approach;
communication channel should be appropriate depending on the nature and purpose of
contents to be conveyed; communication should be so strategically planned that it
motivates the communication to act upon it, Polanyi and Michael (1966). Common
barriers to communication in an organization include; distance, distortion, semantics, lack
of leveling, time pressures, personal incompatibility, selective perception and emotions.

The physical distance between the supervisor and his subordinate results in less face-to-
face communication leading to misunderstanding or lack of understanding of the message
Distortion occurs when individual fails to distinguish factual data from his own views,
feelings emotion etc and the tendency to make value judgments on the statement of
others. Semantics deal with language aspect of communication. Grady states that the
structure of our language to misrepresentation of the nature of events, Pederson and
Cynthia Ross (July 13, 1998). Lack of leveling happens when there is a difference on the
level of knowledge and expertise of supervisor and subordinate. If the supervisor
communicates with his subordinate at his own level then communication breaks down.
Donaldson, Lex (1990).

16
Managers are often subject to time pressure because decisions must be made within
specified deadlines. Formal channels get short-circuited in the process of expediting
matters which leaves the transmitted communication incomplete rendering
communication ineffective. Polanyi and Michael (1958). Personal incompatibility: occurs
when the personalities of the supervisor and the subordinate clash creating
communication blocks and issues becoming personalized. In case the receiver resort to
selective perception i.e. selectively hearing based on his needs and desires, backgrounds
and other person characteristics, it may lead to perpetual distortion when distressing
barrier to effective communication Martin, B (2000). An emotion is how the receiver
feels at the time of receipt of communication of the message influences how he interprets
it. Extreme emotions or dubitation or depression are quite likely to hinder the
effectiveness of a communication

According to Davenport et al, (2000). there are various ways to overcome communication
barriers in organizations: - The management should orientate its employees at all times.
Management needs to provide the staff with information relating to company objectives,
policies and authority relations. By doing so, the staffs are aware of what’s happening
and many possible conflicts and misunderstanding maybe avoided. An employee who
knows about the company’s working environment is also able to appreciate problems of
other people in the organization, Jensen, Michael and William Meckling (1976). They
should develop proper inter-personal relations. There is a critical need to develop proper
relations between different levels of people working in the organization. Superiors and
subordinates should develop a feeling of mutual trusts and confidence. Wherever
possible, managers should communicate through personal contacts and emphasize that
communication is a two-way process. Schein and Edgar (February 1990)

There should protectively listening. Full attention should be paid to communication

without premature evaluation or judgment. Upward communication is often distorted
when a manager uses his status and starts giving his own suggestions and viewpoints in
the course of his face-to-face discussion with the subordinate. Without emphatic
17
listening, free and frank response cannot be expected. In protective listening, the listener
used to understand the viewpoint of the communicator without prejudging approving or
disapproving what he says. Spiegler and Israel (June 2000). The management should
encourage proper usage of language. Semantic distortions can be minimized by
communicating the message in direct, simple and meaningful language. Information
should be worded so as to reach the level of the readership. Communication is not
accepted if it is not properly understood. Polanyi and Michael (1958). Communication
should be through actions and deeds. When a message is communicated without being
acted upon, it tends to distort the current and subsequent communication from the
manager. The rationale is that actions matching with deeds speak louder and clearer.

The management should use grapevine strategically. Grapevine is an essential part of the
communication network in every organization. There are occasions when due to personal
and other reasons, information should not be transmitted through the official channels of
communication. Tuomi and Ikka (Winter 1999-2000). Employees should watch non-
verbal cues. In the case of oral communication, the sender should observe the actions of
the receiver and find whether they go along with the understanding of the sender.
Feedback should be encouraged in the organization. Feedback is a very important tool in
improving communication. Meaningful communication occurs when it is received as it
was intended. Performance reports, questions clarifications, suggestions and emphatic
listening are also very useful in providing the necessary feedback, Alchian, at el, (1972).

2.3 Critical Review

Based on the factors affecting performance transfer, and the types of organizational
culture discussed above, it indicates the fertility to knowledge transfer of each of the
organizational culture types, Polanyi and Michael (1958). An organizational culture that
18
is open to change, innovation, and achievement appears to be one in which there are
likely to be more relational channels, because it is likely to support and nurture the
human-to-human communications that comprise the relational channels. It is also likely
to exhibit partner similarity, leading to reduced friction in the transfer of knowledge.
Such an organization is also likely to exhibit organizational self-knowledge, which will
support the seeking out and identification of those with knowledge to share. Finally, such
an organization is likely to have low divergence of interest, as the openness and
communication is likely to foster the type of communication that leads to shared
understanding and therefore shared goals. Such an organizational culture is likely to be
fertile to knowledge transfer, Jensen, Michael and William Meckling (1976). An
organizational culture that is interested in being the best and being innovative appears to
be one which would be likely to support open relational channels, as a way to achieve its
goals of excellence and innovation. Because of this, it is also likely to have partner
similarity in the important area of common goals and interests. Such an organization is
likely to promote organizational self-knowledge as a means to ensuring broad
understanding of the ways to achieve organizational goals of excellence and innovation.
In the broad areas of organizational goals, it is likely to have low divergence of interest,
because such divergence would likely work against the achievement of organizational
goals. An organizational culture that is task-oriented in this way might be considered a
performance fertile organizational culture. Delong, D.W. and Fehay, L. (2000).

An organizational culture that is bureaucratic appears to be one in which relational

channels are not well developed. The desire for conventional and avoidance of originality
will work against the establishment of such channels. It may also exhibit little partner
similarity, particularly in the important areas of tacit knowledge development. Such
development would work against the organizational culture of conformity and lack of
personal point of view. Because the focus would be on conventionality and following of
rules, there would likely be little support for development of organizational self
knowledge. Finally, there would likely be wider divergence of interests, because personal
interests would not play a major role in organizational operations. Therefore, personal

19
interest would be less important, and there would be less reason to ensure commonality.
Therefore, such an organization is likely to be relatively infertile to knowledge transfer.
Polanyi and Michael (1958). An organizational culture that is marked by competition and
confrontation appears to be one in which relational channels will be limited and guarded,
to protect the individuals in the organization from the negative effects of competition and
perfectionism. Partner similarity and organizational self-knowledge are also likely to be
low for the same reason. Because of the need to guard against the confrontational
approach of such and organization, there will be less development of the type of
communication that develops partner similarity and organizational self-knowledge. In
such an organizational culture, divergence of interest is likely to be high, as each member
of the organization seeks to achieve personal goals within a competitive, perfectionist
organization. Therefore, such an organization culture is likely to be relatively infertile to
knowledge transfer.

2.4 Summary
Past researchers have done studies to investigate the effects of organizational structure on
the performance of FMCG manufacturers. However, no study has been done on the
effects of the same on financial institutions. This is why the researcher has decided to do
a study to determine the effects of organizational structure on the performance of
financial institution

2.5 Conceptual framework

Leadership
IV DV

Organization Structure Organization Values

20

Communication
Source: Author (2023)

Figure 2.5: The effects of organization structure on the performance of organizations

Figure 1.1 conceptualizes the relationship between organization structure and

organizational performance. The independent variable is organization structure. The
dependent variables are, leadership, organization values and communication. The
dependent variable is organization performance.

CHAPTER THREE

RESEARCH DESIGN AND METHODOLOGY

3.1 Introduction
21
This chapter discusses the research design, target population, sampling design data
collection instruments and procedures and data analysis methods.

3.2 Research Design

The researcher will use descriptive survey. Mugenda, (2003), avers that a survey is an
attempt to collect data from members of a population in order to determine the current
status of the population in respect to one or more variable. They are useful in providing
original information and enable the researcher to collect a lot of data within a short time,
more so to collect both qualitative and quantitative data which permit a fuller explanation
of the phenomenon under investigation. The study shares the opinion.

3.3: Target Population

The population of this study will comprise of 50 members of staff from the top-level
management, Middle level management and operational staff of K.C.B.

3.4 Sampling Design

A simple random technique will be used to obtain 30 respondents that will serve as the
sample for this study. Simple random sampling method will involve giving a number to
every subject member of the accessible population placing the numbers at random. The
subjects corresponding to the number picked are included in the sample. Mugenda and
Mugenda (2003).

3.4 Data collection instruments and procedures

The instruments which will be used in this study will be questionnaires. The
questionnaires will be in two sections. Section A will contain questions on general
information to capture information on the demographic characteristics of the personnel.
The emphasis for the study will concentrate on section B which will specifically explore
on organizational structure. The selection of questionnaires is guided by the nature of the
data to be collected, the time available and the objectives of the study. The researcher
will be mainly concerned with views, opinions, feelings and attitudes and perceptions of
22
the respondents in regards to culture. Bell, (1993) avers that such information would best
be collected through the use of questionnaires and interviews. The researcher will use
semi structured questionnaires. This will enable the researcher to balance the quality and
quantity of data collected. This will make data analysis simple. It also provides more
information. Informal interview technique will also be used. This will enable the
researcher to collect first hand information. The questionnaires will distribute to the
respondents using ’drop and collect’ methods. The questionnaires will be collected three
weeks later. Questionnaires will be used since the study is concerned with variables that
cannot be directly observed.
3.6 Data Analysis Methods
The data collected from the respondents will be analyzed using qualitative and
quantitative methods. This will include descriptive statistics. The findings will be
presented in tables, graphs and pie charts

REFERENCES
Alchian, Armen and Harold Demsetz (1972). Production, Information
Costs, and Economic Organization. The American Economic
Review, 62: 777-795.
Almeida, Paul and Bruce Kogut (July 1999). Localization of
23
 Knowledge and the Mobility of Engineers in Regional Networks.
Management Science, 45: 905-917.
Brasmen, Henrik, Julian Brinkinshaw and Robert Nobel (Third Quarter
1999). Knowledge Transfer in International Acquisitions. Journal
of International Business Studies. 30: 439-463.
Darr, Eric and Terri Kurtzberg (May 2000). An Investigation of Partner
Similarity Dimensions on Knowledge Transfer. Organizational
Behavior and Human Decision Processes, 82: 28-44.
Davenport, Thomas and David DeLong and Michael Beers (Winter
1998). Successful Knowledge Management Projects. Sloan
Management Review, 39: 43-57.
Davenport, Thomas H. and Laurance Prusak (2000). Working
Knowledge: How Organizations Manage What They Know.
Boston, Harvard Business School Press.
DeLong, D.W. and Fehay, L. (2000). Diagnosing Cultural Barriers to
Knowledge Management. Academy of Management Executive, 14
(4), 113-127.
Donaldson, Lex (1990). The Ethereal Hand: Organizational
Economics and Management Theory. Academy of Management
Review, 15: 369-381.
Jensen, Michael and William Meckling (1976). Theory of the Firm:
Managerial Behavior, Agency Costs and Ownership Structure.
Journal of Financial Economics, 3: 305-360.
Martin, B (2000). Knopwledge Management within the Context of
Management: An Evolving Relationship. Singapore Management
Review, 22(2), 17-73.
Nonaka, Ikujiro and Hirotaka Takeuchi (1995). The Knowledge-
Creating Company. New York, Oxford University Press.
Pederson and Cynthia Ross (July 13, 1998b). Management of
Knowledge New IT ‘Craze’. Computing Canada, 24: 19-21.
Polanyi and Michael (1958). Personal Knowledge. Chicago: University
of Chicago Press.
Polanyi and Michael (1966) The Tacit Dimension. New York:
Doubleday & Company.
Rulke, Diane, Srilata Zaheer, and Marc Anderson (May 2000).
Sources of Managers, Knowledge of Organizational
Capabilities. Organizational Behavior and Human Decision
Process, 82: 134-149.
Schein and Edgar (February 1990). Organizational Culture. American
Psychologist, 45: 109-119.
Spiegler and Israel (June 2000). Knowledge Management: A new Idea
or a Recycled Concept, Communications of the Association for
Information Systems, 3: n. page.
Tuomi and Ikka (Winter 1999-2000). Data is More Than Knowledge:

24
 Implications of the Reversed Knowledge Hierarchy for Knowledge
Management and Organizational Theory. Journal of Management
Information System, 16: 103-117.
Xenikou, Athena and Adrian Furnham (1996). A Correlational and
Factor Analytical Study of Four Questionnaire Measures of
organizational Culture. Human Relations, 49: 349-371.

APPENDICES
5.1 QUESTIONNAIRE ONE

25
 I am a student at Siaya Institute of Technology conducting research on effects of
Organizational structure on performance in financial institutions a case study on Kenya
Commercial Bank Kisumu branch. Your participation will help achieve the objectives of
the study. The information will strictly be used for academic purposes and will be treated
with confidence.

Instructions
Section 1 of this questionnaire asks a bout the personal data and thereafter section 11 asks
about the main objectives of this research. You are required to read and understand the
questions before answering questions.. Kindly do tick or fill in the blank spaces where
applicable.

Section 1: Personal Data

1. Name of Respondent……………………………………………………(Optional)
2. What is your age?
25-30 Years

30-35 Years

40-55 Years

3. State your sex

Male

Female

4. What is the level of your education? (Optional)

Primary

Secondary

26
 Tertiary College

University

Others (Kindly do specify)

5. In what level of Management are you?
Top level

Middle level

Operational Level

6. For how long have you worked for the organization?

Below 1year

2-3 Years

4-5 Years

6 Years and above

27
Section 11:

7 How does organization structure affect leadership in organizations?

................................................................................................................................................
................................................................................................................................................
................................................................................................................................................
...............................................................................................................................................

8 In what ways does organization structure affect organizational values?

................................................................................................................................................
................................................................................................................................................
................................................................................................................................................
................................................................................................................................................

9 What are the effects of organization structure on communication in organizations?

................................................................................................................................................
................................................................................................................................................
................................................................................................................................................
...............................................................................................................................................

WORK PLAN

28
Activity Time 2023
(months)
Development of Proposal 1 March
Developing & Piloting of Instruments 1 April
Data collection 1 May
Data organization Analysis and Interpretation 1 June
Typing/Editing/Report Writing/ Submission 1 July
Source: Author (2023)

BUDGET

29
No Item Description Estimated
Amount(Kshs)
1. Stationery i. 2 reams of photocopy
papers @400/= 800.00
ii. Writing materials e.g.
writing pads, pens and
1000.00
pencils, @ 1000/=
iii. Printing cost @ 2000.00 2000.00
iv. Secretarial cost @
1000.00
1000.00 4,800.00
2. Personnel i. Research supervisor @ 4000.00 4,000.00
ii. Questionnaires cost @ 1000.00 1,000.00
iii. Interview cost @ 2000.00 2,000.00
iv. Traveling cost @ 2000.00 2,000.00
v. Permit cost @ 1000.00 1,000.00
vi. Business reply fees @ 1000.00 1,000.00
vi. Box rental fees @ 1000.00 1,000.00
12,000.00
3. TOTAL 16,800.00
Source: Author (2011)

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