How Does Organizational Structure Affect Performance Measurement?

Modern businesses have complex structures. Decisions taken by top managers and senior personnel affect the overall performance of the business. Strategic performance measurements are aimed at monitoring the effectiveness of an organization's structures.

Organizational structure is seen as the hierarchy through which a group, business or organization of people collaborate to achieve a set of objectives and common goals. The ways these hierarchical structures interact with each other affects the measurement of effectiveness in that organization.

In an organization, it is assumed that functional units or departments understand their roles and how these contribute to the organization's overall goals. But, most functional units perform their roles in a way that only reflects their specialization and focuses on their own goals. The personal preferences and agendas of a department’s senior managers influence the performance outcomes of that department.

Organizational structures that are inorganic and less versatile tend to cause miscommunication in the overall strategy of the organization. Miscommunication largely affects the execution of tasks and objectives and the organization's performance measurements. Open, fluid organizational structures have exemplary performance measurements. Second-and third-tier employees have an understanding of the goals the first-tier functional units have planned to achieve.