The main research question in this study was; how is organization structure affecting financial performance of Student Christian Organization of Malawi? The Student Christian Organization of Malawi (SCOM) is an indigenous interdenominational Christian Organization committed to the evangelization, discipleship and training of and has been in existence for 55 years. The Organization consists of groups of Christian students in Secondary schools, colleges and universities throughout Malawi and stakeholders. The mission of the Student Christian Organization of Malawi is dedicated to “building a well-coordinated and financially stable organization that is committed to the evangelism, discipleship and training of students and equipping them to live as witnesses of Jesus Christ on campus and beyond.”
However according to SCOM 2011-2016 SCOM is failing to reach number of students in Malawi because of lack of resources. Only a few schools are always reached which is making SCOM not to fulfil its aims on students. The organization is facing operational challenges which are contributing to its financial instability. According to 2017-2021 strategic plan some of the weaknesses indicated on SWOT analysis contributing for SCOM not to achieve its mission for years were indicated as follows; the organization is reactive and not proactive to issues. There is a Weak linkage within grassroots structures, Operates on a very weak and unstable financial base. Poor communication system within the ministry and with stakeholders, Lack of proper reinforcement of policy guidelines, Inconsistent in application of policy guidelines. SCOM is also faced with Weak monitoring and evaluation systems, Little or no motivation of associates and staff ,Weak staff and associate recruitment and retention strategies, Inconsistency in training and inducting new staff and associates, Inadequate discipleship of students and associates and emergence of factions due to decentralization. (SCOM strategic plan 2016-2020)
If the organization continue to face these challenges SCOM mission to reach out to student will not be fulfilled hence the organization will liquidate its assets breaching out the going concern principle which suggest that an organization will operate for a foreseeable future. This challenges will only be averted with enough financial resources and financial stability.
Table of Contents
CHAPTER 1. INTRODUCTION
1. Research Overview
1.1 Background of the study
1.2Problem statement
1.3 Research questions
1.4 Research Objectives
1.5 Significance of the Study
1.6 Structure of the paper
1.7 Chapter summary
CHAPTER 2. LITERATURE REVIEW
2.Introduction
2.1 Inside researcher
2.2 Background of SCOM
2.2.1 Vision statement
2.2.2 Mission Statement
2.2.3 Organizational History and Profile
2.2Financial performance
2.3.1Indicators of financial performance in nonprofit making organization
2.3.2Financial performance analysis
2.3.3 Areas of Financial Performance Analysis
2.3.4 Working capital management
2.4 Other factors that affects financial performance
2.4.1 Gender
2.4.2 Level of education
2.4.3 Age Diversity
2.4.4 Motivation
2.4.5 Number of staff
2.5 Organization structure
2.5.1 Decision making
2.5.2 Policies
2.5.3 Effects of decision making on financial performance
2.6.1 Effect of formalization on financial performance
2.7 Organization size
2.7.1 Effects of organization Size on financial performance
2.8 Theoretical framework
2.8.1 Agency Theory
2.8.2 Conflicts between managers and principles
2.8.3 Self- interest behaviour
2.8.4 Cost of principal and agents conflict
2.9 Conceptual frame work
2.9.1 Variables in the conceptual framework
2.9.2 Independent variables
2.10 Summary of the chapter
CHAPTER 3. RESEARCH METHODOLOGY
3.Introduction
3.1 Research philosophy
3.2Research approach
3.3Research design
3.4 Site of the study
3.5Population of the study
3.6 Sample size
3.7 Pretesting/piloting
3.8Data collection and procedure
3.8.1 Questionnaire
3.8.2 Interviews
3.8.3 Observation
3.9 Data analysis and interpretation
3.9.1 Quantitative data analysis
3.9.2 Qualitative data analysis
3.9.3 Data interpretation
3.10 Triangulation
3.11 Validity, reliability and generalizability
3.12 Limitations and Delimitation
3.13 Ethical consideration
3.14 Chapter summary
CHAPTER 4. RESULTS AND DISCUSSION
4. Introduction
4.1 Primary data analysis
4.1.1 Demographic Characteristics of SCOM Staff.
4.1.2: Gender of Respondents;
4.1.3 Age Diversity
4.2 The extent to which current Structure centralization factors affect financial performance;
4.2.1 Department meetings on financial issues are conducted on regular basis
4.2.2 There formal organization financial guidelines
4.2.3 There are written communication regarding financial matters
4.2.4 Every position has a written job description and every staff knows there duty
4.2.5 Financial policies procedures and manuals are available
4.3 Current formalization structure of student Christian organization of Malawi
4.3.1 Hierarchy of decision making in SCOM
4.3.2 There is established department for every position in the organization
4.3.3 Department financial Decisions are approved by the Board
4.3.4 Participation in financial decision
4.3.4 Investment decision are approved by the board
4.3.5. No or Little action can be taken by staff without consulting superiors.
4.3.6 Organization Cash books are reconciled every three months
4.3.7 Cash is kept in a safer Box
4.3.8 Financial manual is in place
4.3.9 Cheques signing
4.3.10 Financial Transaction are authorized by appropriate member.
4.3.11 Accounts receivables are reviewed every three months
4.3.12 Segregation of duties
4.5 Impact of Organization size on performance of Student Christian Organization Malawi:
4.5.1 Working capital ratio In SCOM
4.6 Return on Assets
4.10 Observation
4.10.1 SCOM income generating activities
4.10.2 Capacity of staff
4.10.3 Financial policies and other documents
4.10.4 Segregation of duties
4.11 Interview questions
4.11.1 Staff motivation
4.11.2 Individual satisfaction with current structure
4.12 Organization structure
4.12.1 Decision making structure
4.12.2 Improving financial performance of organization
4.13 Financial Decision making in the organization
4.13.1 Who makes most financial decision in the organization?
4.13.2 The researcher wanted to find out if it necessary for the board to approve financial decision
4.14 Organization policies
4.14.1 The researcher wanted to find out how often policies are reviewed in the organization
4.15 Secondary data analysis
4.15.1 Staff Motivation
4.15.2 Income generating activities
4.15.3 Organization SWOT analysis
4.16 Chapter Summary
CHAPTER 5. CONCLUSIONS AND RECOMMENDATIONS
5. Introduction
5.1 Conclusions
5.2 Recommendations
5.3 Practical contributions
5.4 reflection of the study
5.4.1 Strength
5.4.2 Weaknesses
5.5 areas for further research
5.6 Chapter Summary
BIBLIOGRAPHY
APPENDIXIES
Appendix 1: Cover Letter
Appendix 2: Research questionnaire
Appendix 3: Financial performance Data correction form
Appendix 4: Interview guide questions
Appendix 5: Areas of observation
CHAPTER 1. INTRODUCTION
1. Research Overview
Slevin (2007) highlighted organizational structure as a critical antecedent to financial performance in any organization. The context of organization financial performance as attributed by its structures depicts two dimensions, namely self-management and interdependence, for both inherent organizational complexity, prescriptions, centralization/formalization which are three elements of organization structure. Moreover, two important elements of organization structure namely interdependence and self-management as a way for knowledge creation and transmission have strong linkage and interactions among various section and departments. For organization to keep growing and going there is a need for financial stability. There so many elements that help organization to achieve financial stability and one of them it is structure. Structure plays a role for an organization to achieve its stability. This study falls in the field of financial management, specifically it focuses on an investigation into the impact of organization structure into financial performance
1.1 Background of the study
Student Christian Organization of Malawi, formerly known as the Nyasaland Student Organization, was founded in 1961 by the Nyasaland Council of Churches now Malawi Council of Churches to bring together Christian students to witness for Christ on campus. The birth of SCOM was not only focused on the spiritual aspect of students. Rather it was meant to develop both the mental and spiritual life of the students so that they could take leadership positions in the church and in the larger society. As the nation was undergoing transition from colonial to self-rule, the need to develop capable leaders to take over from the colonial masters was critical. SCOM is nonprofit making organization falling under faith based organization. The organization continued to experience growth as it expanded to other areas. In 1983, it got affiliated to the International Fellowship of Evangelical Students [IFES]. Two years later [1985], the graduates’ wing of the organization was formed to complement the work of the few paid staff. In 2004 the organization established an HIV/AIDS desk to coordinate its efforts to respond to the growing pandemic. But growth brought with it a number of challenges as well.
Lack of resources became a major challenge. Coupled to that was the fact that the new found autonomy made the organization to begin making its independent judgments on doctrinal issues that did not lean on one particular denomination as was the case when church ministers were in control. The lack of adequate resources for its operations incapacitated the organization making it difficult for it to accomplish its goals especially because most member churches were not willingly providing financial support to the organization. There has never been a time since its inception when there has been adequate resources [material, human and financial] to enable the organization implement its activity. The organization has impacted numerous “graduates” most of whom are capable of making significant financial contributions that can sustain it. (SCOM strategic plan 2011-2016).
Structure is the formal aspect of work organization. An organization’s structure is concerned with the way in which numbers of workers are brought together in groups in order to undertake specific work tasks. It is also concerned with how different groups of workers interrelate with one another and with the managers who are given responsibility for the work undertaken by various groups. In short organization structure has the following variables purpose; that is the fundamental aims and goals of the group, polices, the environment people; that is those ones who make up them organization task that is the basic activities that are required to achieve organizational aims. Stoner (1998) Technology; that is the technical aspect of the internal environment and the external environment; that is the external market, technologies and social conditions affecting the organization activities. Organization structure may have an effect on the financial performance. Some structures makes employees performance on the work area to be de-motivated and at the end of the day not to be satisfied with their work and this result into poor performance, other structures lack all the necessary things to motivate the employees while on other structures employee performance is high and employees are always motivated leading to the employees satisfaction with their job at the end of the day improving organization financial performance. Senyuce (2009) structure is also concerned with manager’s authority over other individuals and groups within the organization. Organization Burners, (2008).
1.2 Problem statement
The Student Christian Organization of Malawi (SCOM) is an indigenous interdenominational Christian Organization committed to the evangelization, discipleship and training of and has been in existence for 55 years. The Organization consists of groups of Christian students in Secondary schools, colleges and universities throughout Malawi and stakeholders. The mission of the Student Christian Organization of Malawi is dedicated to “building a well - coordinated and financially stable organization that is committed to the evangelism, discipleship and training of students and equipping them to live as witnesses of Jesus Christ on campus and beyond.”
However according to SCOM 2011-2016 SCOM is failing to reach number of students in Malawi because of lack of resources. Only a few schools are always reached which is making SCOM not to fulfil its aims on students. The organization is facing operational challenges which are contributing to its financial instability. According to 2017-2021 strategic plan some of the weaknesses indicated on SWOT analysis contributing for SCOM not to achieve its mission for years were indicated as follows; the organization is reactive and not proactive to issues. There is a Weak linkage within grassroots structures, Operates on a very weak and unstable financial base. Poor communication system within the ministry and with stakeholders, Lack of proper reinforcement of policy guidelines, Inconsistent in application of policy guidelines. SCOM is also faced with Weak monitoring and evaluation systems, Little or no motivation of associates and staff ,Weak staff and associate recruitment and retention strategies, Inconsistency in training and inducting new staff and associates, Inadequate discipleship of students and associates and emergence of factions due to decentralization. (SCOM strategic plan 2016-2020)
If the organization continue to face these challenges SCOM mission to reach out to student will not be fulfilled hence the organization will liquidate its assets breaching out the going concern principle which suggest that an organization will operate for a foreseeable future. This challenges will only be averted with enough financial resources and financial stability .In Malawi few studies on organization structure especially on Christian institutions have been conducted and this study will help SCOM to improve its financial performance.
1.3 Research questions
The main research question in this study was; how is organization structure affecting financial performance of Student Christian Organization of Malawi?
Specific Questions
- What is the effect of organization size on financial performance of Student Christian Organization of Malawi?
- What is the current formalization structure of student Christian organization of Malawi?
- What is the current centralization structure of student Christian organization of Malawi?
1.4 Research Objectives
The main objectives of this research was to investigate how organization structure is affecting financial performance of student Christian organization of Malawi Specific objectives
- To investigate the effect of organizational size of on the financial performance of Christian organization of Malawi
- To assess current structure formalization of student Christian organization of Malawi
- To assess current structure centralization structure of Student Christian organization of Malawi
1.5 Significance of the Study
This study finds out how the structure of an organization can result to better financial performance of an organization. This will help unveiling different types of organization structure and structural variables. It also helps to understand the need of having a well-structured organization so that at the end of the day management is able to make decisions and organization goals and objectives are achieved. The study will give knowledge in how good organization structure affects organization financial performance. This study will add literature in the library on the impact of organization structure on financial performance since they are no studies conducted on effects of structure on financial performance on Christian organizations.
1.6 Structure of the paper
This study has been organized under five chapters. Chapter one has begun with a brief background of the study. It has also highlighted problem statement, the research objectives and questions, justification and significance of the study. Chapter two is literature review where related literature on the topic under the study has been highlighted. It has shown the theoretical framework to provide guidance on the direction of the study.
Chapter three is methodology of the study. It has covered areas such as research strategy, research design, population and sampling techniques, methods of data collection and analysis, reliability, validity, ethical issues and limitations of the study. Chapter four constitutes presentation and discussion of findings from data collected for the topic under investigation. Chapter five provided conclusions and recommendations on the objectives of the study.
1.7 Chapter summary
In this chapter introduction and background of the study have given a clear basis for understanding the problem statement and significance of the study that was conducted. The chapter also outlined how out comes of the study would make contribution to improve financial performance of Christian institution in Malawi. In addition the chapter sets the stage for the research project and gives out a brief summary to the background of the problem and contextualize how it is going to be studied. The research questions and objective have also been outlined within the chapter.
CHAPTER 2. LITERATURE REVIEW
2. Introduction
This chapter present a critical review of literature with a focus on organization structure contribution to financial performance of an organization and in this case Student Christian Organization of Malawi (SCOM). The study starts with describing position of the researcher, background of SCOM, presents the key elements in organization structure, systems, policies and procedures. Finally theoretical and conceptual frame work is presented in line with the three aforementioned objectives.
2.1 Inside researcher
The researcher was an inside researcher. Bonner and Tolhurst (2002) identified three key advantages of being an insider-researcher which are: (a) having a greater understanding of the culture being studied; (b) not altering the flow of social interaction unnaturally; and (c) having an established intimacy which promotes both the telling and the judging of truth. Further, insider-researchers generally know the politics of the institution, not only the formal hierarchy but also how it “really works”. They know how to best approach people. In general, they have a great deal of knowledge, which takes an outsider a long time to acquire as elaborated by Smyth & Holian, (2008).
2.2 Background of SCOM
2.2.1 Vision statement
The vision of SCOM is “to be a vibrant student movement on every campus capable of impacting the whole society for God”.
2.2.2 Mission Statement
The Student Christian Organization of Malawi is dedicated to “building a well-coordinated and financially stable organization that is committed to the evangelism, discipleship and training of students and equipping them to live as witnesses of Jesus Christ on campus and beyond”.
2.2.3 Organizational History and Profile
SCOM, formerly known as the Nyasaland Student Organization, was founded in 1961 by the Nyasaland Council of Churches now Malawi Council of Churches to bring together Christian students to witness for Christ on campus. The birth of SCOM was not only focused on the spiritual aspect of students. Rather it was meant to develop the whole student by addressing both the mental and spiritual life of the students so that they could take leadership positions in the church and in the larger society. As the nation was undergoing transition from colonial to self-rule, the need to develop capable leaders to take over from the colonial masters was critical.
The organization continued to experience growth as it expanded to other areas. In 1983, it got affiliated to the International Fellowship of Evangelical Students [IFES]. Two years later [1985], the graduates’ wing of the organization was formed to complement the work of the few paid staff. During its fortieth anniversary celebrations, delegates to the function passed a resolution that SCOM must be actively engaged in responding to social challenges that affect students. HIV and AIDS was one that featured highly on the agenda. In 2004 the organization established an HIV/AIDS desk to coordinate its efforts to respond to the growing pandemic. This has now been renamed Social Development Section considering that HIV and AIDS are not the only social issues affecting students.
But growth brought with it a number of challenges as well. Lack of resources became a major challenge. Coupled to that was the fact that the new found autonomy made the organization to begin making its independent judgments on doctrinal issues that did not lean on one particular denomination as was the case when church ministers were in control. The lack of adequate resources for its operations incapacitated the organization making it difficult for it to accomplish its goals especially because most member churches were not willingly providing financial support to the organization. There has never been a time since its inception when there has been adequate resources [material, human and financial] to enable the organization implement its activity. Yet the organization has impacted numerous “graduates” most of whom are capable of making significant financial contributions that can sustain it. Managing rapid growth has been a major challenge since then. Again, SCOM’s efforts to be neutral in terms of doctrinal issues [such as baptisms, mode of worship, etc.], created tensions with mainline churches on one hand as they accused it of being loose and more Pentecostal in inclination while the Pentecostals accused it of resisting the move of the Spirit on the other. SCOM has since been treading on a very thin line as regards to these doctrinal issues. That notwithstanding, SCOM remains ones of the truly ecumenical student organization in Malawi as it has no direct inclination to a particular denominational doctrinal basis.
This trend has continued to date while the ministry has grown in terms of membership which is estimated at more than 50,000 students in 1200 branches and material and financial needs. The financial requirements have also continued to rise every year making it very difficult for the few staff to meet the expectations of the members.
The organization has levels of power and decision making. SCOM organogram has levels of power and decision making which moves bottom up. Below is the Organogram of Student Christian Organization of Malawi
SCOM Organogram
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Figure 2. 1 : SCOM Organogram
2.2 Financial performance
ACCA (2009) defines financial performance as the level of performance of a business over a specified period of time expressed in terms of overall profits and losses during that time. Evaluating financial performance of a business allows decision makers to judge the results, business strategies and activities in objective monetary form. One of the fundamental facts about business is that the operating performance of the firm shapes its financial structure.
2.3.1 Indicators of financial performance in nonprofit making organization
The following are indicators of financial performance in nonprofit making organization;
- The efficiency of spending valuable resources,
- Short term assets
- Total assets
- Return on assets ratio (ROA) and working capital ratio
Mckinsey and company (2009) stated that Financial Performance in broader sense refers to the degree to which financial objectives being or has been accomplished. It is the process of measuring the results of a firm's policies and operations in monetary terms.one of the tools used to measure organization financial performance is by the use of the financial statement. Financial statement is acollection of data that isorganizedaccording to logical and consistent accounting procedures. Its purpose is to convey an understanding of some financial aspects of a business firm. It may show a position of a period of time as in the case of a Balance Sheet, or may reveal a series of activities over a given period of time, as in the case of an Income Statement. Thus, the term ‘financial statements’ generally refers to two basic statements: the Balance Sheet and theIncome Statement.Vafeas,(2009)The Balance Sheet shows the financial position of the firm at a given point of time. It provides a snapshot that may be regarded as a static picture. “Balance sheet is a summary of a firm’s financial position on a given date that shows Total assets = Total liabilities + Owner’s equity.” TheIncome Statement reflects the performance of the firm over a period of time. “Income statement is a summary of a firm’s business revenues and expenses over a specified period, ending with net income or loss for the period.” However, financial statements do not reveal all the information related to the financial operations of a firm, but they furnish some extremely useful information, which highlights two important factors profitability and financial soundness.
2.3.2Financial performance analysis
The Journal of finance (2005) points out that financial performance analysis includes analysis and interpretation of financial statements in such a way that it undertakes full diagnosis of the profitability and financial soundness of the business.
2.3.3 Areas of Financial Performance Analysis
Financial analysts often assess the firm's production and productivity performance (total business performance), profitability performance, liquidity performance, working capital performance, fixed assets performance, fund flow performance and social performance. Various financial ratios analysis includes
2.3.4 Working capital management
According to ACCA (2009) the working capital ratio, calculated as current assets divided by current liabilities, is considered a key indicator of a company's fundamental financial health since it indicates the company's ability to successfully meet all of its short-term financial obligations. Although numbers vary by industry, a working capital ratio below 1.0 is generally indicative of a company having trouble meeting short-term obligations, usually due to insufficient cash flow. Working capital ratios of 1.2 to 2.0 are considered desirable, but a ratio higher than 2.0 may indicate a company is not making the most effective use of its assets to increase revenues.
The collection ratio, also known as the average collection period ratio, is a principal measure of how efficiently a company manages its accounts receivables. The collection ratio is calculated as the number of days in an accounting period, such as one month, multiplied by the average amount of outstanding accounts receivables, with that total then divided by the total amount of net credit sales during the accounting period. The collection ratio calculation provides the average number of days it takes a company to receive payment, in other words, to convert sales into cash. The lower a company's collection ratio, the more efficient its cash flow.
The other element of working capital management is inventory management. To operate with maximum efficiency and maintain a comfortably high level of working capital, a company has to carefully balance sufficient inventory on hand to meet customers' needs while avoiding unnecessary inventory that ties up working capital for a long period of time before it is converted into cash. Companies typically measure how efficiently that balance is maintained by monitoring the inventory turnover ratio. The inventory turnover ratio, calculated as revenues divided by inventory cost, reveals how rapidly a company's inventory is being sold and replenished. A relatively low ratio compared to industry peers indicates inventory levels are excessively high, while a relatively high ratio indicates the efficiency of inventory ordering can be improved. The final element of working capital management is accounts receivables. Accounts receivables being also known as debtors are assets of the organization. They are the dues from the credit customers or client. Effective management of accounts receivable is the great importance as it by increasing cash flows it leads to sound financial health and flexibility of a business entity. There various reasons for setting up accounts receivables in an organization. When goods or services are provided on credit a business records receivables that in turn increase the revenues. ACCA (2009)
2.4 Other factors that affects financial performance
2.4.1 Gender
Mcknisey and company (2007) stated that in gender diverse organizations there is likely to be a better financial performance and a great direction, coordination and control, and of leadership. One the other hand, in organizations lacking gender diversity they are likely to have poor coordination hence resulting to poor financial performance.
According to Mckinisey and company possible explanations for the findings included those organization that women dominates are likely to improve financial performance. Women have greater analytical skills and coordinate activities with much (greater) ease than men while upholding company values and strategy” (Mathews Daniel Kapito 2007): they further said that however women are too emotional compared to men so at times when women are dominant gender in organization it may affect the financial performance of an organization.
2.4.2 Level of education
kasika (2015} said employees with higher education qualification contribute more to organization financial performance compared to those with less. According to Paige theory of development this may suggest that understanding would be easily be enhanced where individuals are the same education level.
2.4.3 Age Diversity
Stanford (1999) he said that age diversity in organization stir constructive debates which also helps to improve organization performance through constructive decisions. He also said that diversity in organization always bring out fresh ideas.
2.4.4 Motivation
Motivation consists of factors within the individual that impel individual action (Locke 2004). Usually, motivation is categorized into intrinsic and extrinsic motivation. Frey (1997, p. 430) defines extrinsic motivation as motivation which derives from preferences activated from outside the person. These preferences can be for example money or different kind of gifts. In turn intrinsic motivation derives from the person’s innate needs. Both Deci and Ryan (1985, p. 30, according to Rynes et al. 2005) and Sprinkle (2000, p. 301) defines intrinsic motivation as individual’s sense of being competence and meaningful. Besides according to Deci and Ryan (1985, p. 30, according to Rynes et al. 2005) also individual’s self-determination is an important aspect of an intrinsic motivation. According to Frey 81997, p. 429) when individual is intrinsically motivated he or she is working for the value of work. Because extrinsically motivated person work for extrinsic reasons instead of intrinsic he or she would be motivated just as long as extrinsic rewards keep coming (Cameron, Banko & Pierce 2001, p. 1). According to Sprinkle (2000, p. 301) another advantage of intrinsic motivation is that intrinsically motivated people are more creative and flexible decisions makers. Besides according to Frey (1997) intrinsically motivated people are usually more content and they have better mental and physical health than solely extrinsically motivated people. Intrinsically motivated people are also more enthusiastic for learning and have more curiosity towards work (Frey 1997).
2.4.5 Number of staff
According to Njiru (2014) Number of staff is a great determinant of financial performance. He also pointed out that Large organization tend to perform better compared to organization with few staff.
2.5 Organization structure
Adams (2005) stated that organizational structuredefines how activities such astask allocation, coordination and supervision are directed toward the achievement of organizational aims. Organizations need to be efficient, flexible, innovative and caring in order to achieve a sustainable competitive advantage. Organizational structure can also be considered as the viewing glass or perspective through which individuals see their organization and its environment. Fowler (1995) points out organization structure as the way responsibility, power are allocated inside the organization and work procedures are carried out by organizational members. Organization structure is internal pattern of relationships, authority and communication. Similarly, Goldhber (2008) defined organization structure as the network of relationships and roles exist sting throughout the organization. Specific working relationships among the people and their jobs to efficiently and effectively achieve the purpose. Furthermore, the structure is important as it helps people to understand their position and role in the organizations processes, who they work with, who work with them, to do the company’s work Fowler (2011).Organization structure has the following important elements;
2.5.1 Decision making
Kreitener (2004) stated that decision making tends to be centralized in mechanistic organization which are rigid, command and control bureaucracies and decentralized in organic organization which are fluid and flexible networks of multitalented people. He also pointed out that every human personnel is an organization asset and seeking their input on every organization activity acts as a motivation and this help them to perform beyond their expectation. Therefore this may improve organization financial performance. Decentralized decision making occurs when i important decisions are made by middle and lower level managers , generally centralized are more tightly controlled while decentralized organization are more adaptive to changing situation. When most decision is pushed to lower level managers the result is always promising. The issues of centralization and decentralization involve the principle of delegation of authority. When limited amount of authority is delegated in an organization, it is usually characterized as centralized . When significant amount of authority is delegated to lower levels in the organization, the organization is characterized as decentralized.When significant amount of authority is delegated to lower levels in the organization, the business is characterized as decentralized . Centralization and decentralization are opposites, and there are different degrees of each. In a highly centralized organization, employees at lower levels have a limited range of decision-making authority. The scope of authority to make decisions in decentralized organizations, by way of contrast, is very broad for lower level employees
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Chart 2.1: levels of authority
2.5.2 Policies
According to Njiru, (2014), policies are principles, rules, and guidelines formulated or adopted by an organization to reach its long-term goals and typically published in a booklet or other form that is widely accessible. Policies and procedures are designed to influence and determine all major decisions and actions, and all activities take place within the boundaries set by them. Procedures are the specific methods employed to express policies in action in day-to-day operations of the organization. Together, policies and procedures ensure that a point of view held by the governing body of an organization is translated into steps that result in compatible outcome
Njiru (2014) they said Policies act as a guiding frame of reference for how the organisation deals with everything from its day- to-day operational problems or how to respond to requirements to comply with legislation, regulation and codes of practice hence this improves financial performance. Further the journal indicated the indicated the following as the roles of financial policies in an organisation.
- Demonstrate that the organisation is being operated in an efficient and business-like manner
- ensure uniformity and consistency in decision- making and operational procedures
- save time when a new problem can be handled quickly and effectively through an existing policy
- Foster stability and continuity
- maintain the direction of the organisation even during periods of change
- provide the framework for business planning
- assist in assessing performance and establishing accountability
- clarify functions and responsibilities
2.5.3 Effects of decision making on financial performance
In all companies on nearly all levels everybody participates with decisions, small or big ones. This is every day job of nearly every employee. Now every day job needs thinking about it, and decisions on most company levels. Decision has some categories like strategic decisions management control etc. Some decisions are made by following certain forms are called structured decisions. Some decisions are not structured basically for complex situations. Decisions made by different persons are of different persons are of different types and only one information system cannot support all requests. Decision process is independent from decision types. Several management perspectives exist in which manager has to act during decision making are technical rational perspective, behavior and cognitive. When trying to make a good decision, a person must weigh the positives and negatives of each option, and consider all the alternatives. Keen (1997)
Kasika (1997) stated that for effective decision making, a person must be able to forecast the outcome of each option as well, and based on all these items, determine which option is the best for that particular situation. A decision which is made by all level of employees, i.e., top, middle or lower level, will increase the performance of the organization because the lower level of employee know very well regarding the ground realities and critical situations of the organization regarding operational aspects of the organization. A decentralized decision is a decision which is taken by considering the view points, participation and power of decision making of all level of employees. Almost all organization made decentralized decisions to some extent but they limit the authority and power of employees. An organization in which employee at lowest level make decisions is a highly decentralized organization and this happened in extreme cases. The degrees to which lower level employees provide input or actually make decision. The organizations have had to become more flexible and responsive; there is distinct trend toward decentralizing decision making. In large companies especially lower level managers are “closer to the action” and typically have more detailed knowledge about problems and how best them than do top managers.2.6 Formalization
Cole (2009) defines formalization as the extent to which rules and procedures are followed in an organization. It is the degree organization standardize behavior through formal training, rules procedures and related mechanism. The advantage is that formalization makes the process of routine, increase the rationality of the organization and make explicit and visible the structure of relationships among the organization participants. The disadvantages are that employees are not allowed to exercise their own judgment, discrimination of work load between employees.
2.6.1 Effect of formalization on financial performance
Main advantages of organizational structure, in comparison to functional one, are in economical design of business processes, as well as in reducing cycle time (Sikavica & Novak, 1999), while there is also a dramatically increased flexibility of the firm along with improved customer satisfaction. Namely, even though processes don’t appear on the balance sheet as such, managers intuitively recognize that they are assets, not expenses (Keen, 1997). A key source of process benefit is improving hand-offs between functions, which can occur only when processes are broadly defined (Oden, 1999). A process orientation leads to cycle time reduction by doing a good job of coordinating work across functions. In addition, some costs are reduced with a process organization.
2.7 Organization size
According to Niiru (2014) Organization size is determined by number of its employees. He mentioned the following as characteristics of organization size; technology required to produce the product, the amount of task specialization, management hierarchy and job satisfaction.
2.7.1 Effects of organization Size on financial performance
Size is an important predictor of the performance. Larger firms show better profitability while smaller firms do not have an ability to compete larger firms in this regards. Njiru (2014) clarified the relationship and concluded that organizational size is having significant impact on performance as well as rights of the shareholders. Larger firms have better chances to obtain credits from financial institutions. They may obtain loan at cheaper rates, as they have better credit worth and low chances of bankruptcy. The same aspect has been confirmed by Gedajlovic and Shapiro (1998). They confirmed that relationship between size and profitability of the organization is positive in nature. On the other hand another study conducted by Yi and Tzu (2005) concluded different results. Their study depicted that size of the firm does not have any impact on the performance
2.8 Theoretical framework
Theoretical framework is a reasoned set of preposition which are derived from and supported by data or evidence (Kombo and Tromp, 2006).The financial management theories are important for any organization that is in business. The financial management theories help managers to handle different matters of the organization. There several financial management theories that have been developed to aid financial managers make decision. This study will be guided by agency theory
2.8.1 Agency Theory
Agency theory explains how best the relationship between agents and principals can be utilized with a view to attaining corporate goals. In this kind of relationship principals and agents have clearly defined responsibilities where shareholders expect the agents to act and make decisions in the principal’s interest. On the contrary, the agent may not necessarily make decisions in the best interests of the principals (Padilia, 2002) the agent may succumb to self-interest, opportunistic behavior and falling short of balancing between the aspirations of the principal and the agent’s pursuits. In such a principal-agent relationship, there is always the potential for conflicts within a firm due to economic incentives faced by the agents who are often different from those faced by the principals, ((ISDA, April 2002).
Agency theory suggests that the firm can be viewed as a nexus of contracts (loosely defined) between resource holders. An agency relationship arises whenever one or more individuals, called principals, hire one or more other individuals, called agents, to perform some service and then delegate decision-making authority to the agents. The primary agency relationships in business are those (1) between stockholders and managers and (2) between debt-holders and stockholders. These relationships are not necessarily harmonious; indeed, agency theory is concerned with so-called agency conflicts, or conflicts of interest between agents and principals. This has implications for, among other things, corporate governance and business ethics. When agency occurs it also tends to give rise to agency costs, which are expenses incurred in order to sustain an effective agency relationship (e.g., offering management performance bonuses to encourage managers to act in the shareholders' interests). Accordingly, agency theory has emerged as a dominant model in the financial economics literature, and is widely discussed in business ethics texts.
2.8.2 Conflicts between managers and principles
Njiru (2014) pointed out that agency theory raises a fundamental problem in organizations—self-interested behaviour. A corporation's managers may have personal goals that compete with the owner's goal of maximization of shareholder wealth. Since the shareholders authorize managers to administer the firm's assets, a potential conflict of interest exists between the two groups.
2.8.3 Self- interest behaviour
Agents have the ability to operate in their own self-interest rather than in the best interests of the firm because of asymmetric information (e.g., managers know better than shareholders whether they are capable of meeting the shareholders' objectives) and uncertainty (e.g., myriad factors contribute to final outcomes, and it may not be evident whether the agent directly caused a given outcome, positive or negative). Evidence of self-interested managerial behaviour includes the consumption of some corporate resources in the form of perquisites and the avoidance of optimal risk positions, whereby risk-averse managers bypass profitable opportunities in which the firm's principals would prefer they invest. Njiru (2014)
In addition, the owner-manager may decide to consume more perquisites, because some of the cost of the consumption of benefits will now be borne by the outside shareholders.
In the majority of large publicly traded corporations, agency conflicts are potentially quite significant because the firm's managers generally own only a small percentage of the common stock. Therefore, shareholder wealth maximization could be subordinated to an assortment of other managerial goals. For instance, managers may have a fundamental objective of maximizing the size of the firm. By creating a large, rapidly growing firm, executives increase their own status, create more opportunities for lower- and middle-level managers and salaries, and enhance their job security because an unfriendly takeover is less likely. Managers can be encouraged to act in the stockholders' best interests through incentives, constraints, and punishments. These methods, however, are effective only if principals can observe all of the actions taken by managers. A moral hazard problem, whereby agents take unobserved actions in their own self-interests, originates because it is infeasible for principals to monitor all managerial actions. To reduce the moral hazard problem, principals must incur agency costs. ((ISDA, April 2002).
2.8.4 Cost of principal and agents conflict
ACCA (2009) defines agency costs those costs borne by shareholders to encourage managers to maximize shareholder wealth rather than behave in their own self-interests. The notion of agency costs is perhaps most associated with a seminal (1976Journal of Financepaper) by Michael Jensen and William Meckling, who suggested that corporate debt levels and management equity levels are both influenced by a wish to contain agency costs. There are three major types of agency costs:
1.Expenditures to monitor managerial activities, such as audit costs;
2.Expenditures to structure the organization in a way that will limit undesirable managerial behaviour, such as appointing outside members to the board of directors or restructuring the company's business units and management hierarchy; and
3.Opportunity costs which are incurred when shareholder-imposed restrictions, such as requirements for shareholder votes on specific issues, limit the ability of managers to take actions that advance shareholder wealth.
In the absence of efforts by principals to alter managerial behaviour, there will typically be some loss of principal’s wealth due to inappropriate managerial actions. On the other hand, agency costs would be excessive if principals attempted to ensure that every managerial action conformed to shareholder interests. Therefore, the optimal amount of agency costs to be borne by shareholders is determined in a cost-benefit context—agency costs should be increased as long as each incremental dollar spent results in at least a dollar increase in shareholder wealth.
According to ((ISDA, April 2002) all companies are exposed to agency problems, and to some extent develop action plans to deal with them. Although steeped in certain setbacks, agency theory was introduced basically as a separation of ownership and control (Bhimani, 2008). The agents are controlled by principal-made rules, with the aim of maximizing shareholders value hence, a more individualistic view is applied in this theory (Clarke, 2007). Indeed, agency theory can be employed to explore the relationship between the ownership and management structure. However, where there is a separation, the agency model can be applied to align the goals of the management with that of the owners. A basic conclusion of agency theory is that the value of a firm cannot be maximized as managers normally hold the executive power which allows them to expropriate value for their own interest (Tumbull, 2007). Irrespective of this claim, agency theory provides a broad analytical framework to examine how successful organizational structure can curb opportunistic managerial behavior, securing a fair return on investment for the suppliers of finance.
This theory applies to SCOM in such away SCOM has donor funded projects and money mostly comes from associates and also donors who act as principals in this case. These have employed staff who are the agents. SCOM staff are expected to keep building a financially stable organization which is also SCOM vision. However the staff have their own agendas which at times differs from those of of the principals and this result in conflict of management hence creates agency problems
2.9 Conceptual frame work
A concept is a general idea or a mental construction in which an attempt is made to draw out a meaning from an otherwise infinitely complex of reality. Concept formation is an essential step in the process of reasoning.it is a tool with which we thin criticize, argue, explain and analyze. It is the building block of human knowledge Heywood (2004). Hence the conceptual framework is delivered from the theories advocated in theoretical frame work. Discussed above and these are motivation, successful management, human relation and successful management theories.
Anderson et al (2001) describe model as a representations of real objects or situations and can be represented in various forms such as iconic models (physical replicas of real objects) .the mathematical model is used in this study, it is a representation of a problem by system of symbols and mathematical relationship or expression. The model is critical part of any quantitative approach to decision making.
In the conceptual framework, the dependent variable is the outcome of organization structure which is the financial performance. In this case the finance performance of student Christian organization of Malawi will use return on assets and working capital ratio to measure financial performance According to Cole (1995) Organization structure has variables which are also taken as input. The major input in organization structure in this model are organization size which manly looks at number of employees, structure formalization which focus on employee policies and centralization which looks at decision making system these three contribute directly to financial performance.. The model has intervening variables which also contributes to financial performance such as motivation and altitude of people and these cannot be measured directly as intervening variables are used to explain relationship between observed variables such as dependent and independent variables. Intervening variables are not real thing there just interpretation of observable facts they create the illusion of being facts. Muriithi (2008)
2.9.1 Variables in the conceptual framework
2.9.1.1 Dependent variable
A dependent variable is what you measure in the experiment and what is affected during the experiment. The dependent variable responds to the independent variable. It is called dependent because it "depends" on the independent variable. In this case the dependent variable is financial performance. The financial performance of Student Christian Organization of Malawi will be determined by;
2.9.1.2Short term assets
According to Njiru (2014) short term asset is an asset that is that is to be sold, converted to cash or liquidated to pay liabilities within one year this was used to determine SCOM ability to pay its liabilities
2.9.1.3 Return on assets
Kreitener (2004) defines Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using itsassetsto generate earnings. Calculated by dividing a company's annualearningsby its total assets, ROA is displayed as a percentage. This will be used to measure how SCOM is using its assets to generate income. If financial position of SCOM is able to help SCOM generate income.
2.9.1.4Current liabilities
Current liabilities is an obligation that is due within one year of a company’s balance sheet and will require the use of current assets or will create another current liability. Journal of finance (2009)
2.9.2 Independent variables
This is a variable that stands alone and isn’t changed by the other variables that you are trying to measure. Heywood (2004)
2.9.2.1 Structure formalization
According to Cole (1995) this deals with organization policies and procedures
2.9.2.2Size
- This looks at organization number of staff. Cole (1995)
2.9.2.3 Structure centralization
- Njiru (2014) said this deals with decision making in an organization.
2.9.2.4 Conceptual frame work mathematical model
Y = (X1+ X2+X3)
Where:
Y = Financial performance of student Christian organization of Malawi
X1 = Organizational size
X2 = Structure formalization
X3= Structure centralization
Chart 2: conceptual framework model
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2.10 Summary of the chapter
The chapter has given the overview of organization structure and financial performance. The main areas that have been highlighted are as follows Introduction, Insider researcher, Background of SCOM ,Organogram, financial performance, organization structure , effects of structure centralization on financial performance, decision making and policies, theories and the conceptual framework
CHAPTER 3. RESEARCH METHODOLOGY
3. Introduction
This chapter discusses the research design, sample size, sampling procedure, and research instruments used in this research. The chapter was also explain sampling procedure, data collection instruments and, their characteristics, and procedures for data collection. The research design seeks to give a picture as how the research was conducted to gather data that was to address and answer issues concerning the problem statement, questions and formulated objectives .
3.1 Research philosophy
The research used both positivism and interpretivism philosophies because the research was both qualitative and quantitative in nature. The researcher used observation and unstructured interviews in the interpretivisim approach. Structured questionnaire was used as part of positivism to have a good reliability and representativeness. Blumberg, Cooper and Schindler (2005) said the positivist tradition stresses the importance of doing quantitative research such as large scale surveys in order to get an overview of society as a whole and to uncover social trends, such as the relationship between educational achievement and social class. This type of sociology is more interested in trends and patterns rather than individuals. To test trends patterns in SCOM this approach was employed
3.2 Research approach
In this study, a mixed method approach involving both qualitative and quantitative aspects was employed. This takes advantage of triangulation. The source of quantitative data was survey that was conducted, observations that involved how a particular word was involved in an interview and secondary data; such as the organization account. Qualitative data source was from secondary data such us reports, observations and interviews.
3.3 Research design
Blumberg, Cooper and Schindler (2005) define research design as a blue print for fulfilling objectives and answering questions. Research design in simple terms is a plan of the methods and procedures that is used by researchers to collect and analyze the data needed by the manager. He also said that by creating a design using diverse methodologies, researchers are able to give greater insight than if there are following the most frequent method encountered in literature or suggested by a disciplinary basis. In this study a survey design was employed according to Mbwesa (2006) research design involves collection of data form population in order to determine the current status of that population with respect to one or more variables. This research design was chosen because it helped to determine the current situation of the student Christian organization of Malawi in. Anonymity of surveys allows respondents to answer with more candid and valid answers. To get the most accurate data, respondents to be as open and honest as possible with their answers. Surveys conducted anonymously provide an avenue for more honest and unambiguous responses than other types of research methodologies, especially if it is clearly stated that survey answers will remain completely confidential.
In this study a threefold classification of explanatory, exploratory and descriptive studies was used (Saunders et al 2000). Explanatory studies establish causal relationship between variables. The emphasis is on studying a situation or a problem in order to explain relationship between variables. Exploratory studies are used to find out what’s happening to seek new insights to ask questions and to assess phenomena in a new light (Robson1993). It is useful approach if someone wants to clarify his understanding of a problem by search of literature, talking to expert or conducting a focus group interview, (Saunders et al 2000). Descriptive studies portray an accurate profile of person events or situation. Data collection used a quantitative and was supplemented by qualitative approach. The employment of two methods in the study enables triangulation advantages to be used. The main data collection was quantitative. For the purpose of the study, the researcher used questionnaires as direct instrument for collecting data. The questionnaire was set of questions to which the respondents were required to answer. These questionnaires were structured in multiple choice terms, which the respondents chose from possible options.
3.4 Site of the study
The research was conducted at student Christian organization of Malawi in Lilongwe Malawi.
3.5 Population of the study
Mugenda (2010) observe that a population is an enumeration of all the elements with the desired characteristics, making the universe of the study. Blumberg, (2005) define a research sample as part of the target population, carefully selected to represent a population. By looking at student Christian organization of Malawi organization structure this study used 100 percent of population of student Christian organization of Malawi,35 employees who are the 5top managers, 8low level managers and all 22other subordinates for consistent and un biased results. It encompassed their educational level and their hierarchical position in the organization. The staffs that form the target group was selected from organization that have a cosmopolitan staff composition, i.e. a fair representation of personnel of both genders and staff with varying years of work experience.
3.6 Sample size
The targeted all 35 staff of SCOM however purposeful sampling was used during semi structured interviews. 10 respondents were drawn from the population. In purposeful sampling, according to Schumacher and McMillan (19993), the researcher searches for information-rich key informants, groups, places or events to study. These samples were chosen because the researcher believes the subjects are knowledgeable and informative about the phenomena that the researcher is investigating. The researcher self-administered the questionnaires to respondents who were sampled.
3.7 Pretesting/piloting
A pilot study was conducted at ministry of hope. Five questionnaire were answered by staff from ministry of Hope. The pilot study was conducted to see if the questionnaire had errors and this was also to add to the credibility of the research.
3.8 Data collection and procedure
Data of the period of eight years from 2008 to 2016 in line with the research variables was collected to analyze SCOM financial performance on the variable organization size. The following tools were used to collect data; questionnaire, interviews and observation. The data was collected using questionnaires.
3.8.1 Questionnaire
The questionnaire had closed ended questions to facilitate respective interviewees with giving information that they feel comfortable with. The use of the questionnaires helped in creating a consistency base in the answering of the research question and for easy data interpretation. Close- ended questions were favorable for efficiency and specifically easier to measure, record and analyzed. During the quantitative phase of the investigation structured questionnaires were used. During the qualitative phase, 10 participants from the same sample were used. A semi-structured interview guide was used.
3.8.2 Interviews
The interviews were semi -structured so as to provide latitude for probing questions to gain better insight into the financial performance and organization structure of staff at student Christian organization of Malawi. . A semi-structured interview guide was used. The interviews were recorded and upon completion, the tapes were transcribed verbatim to analyze. The interviews were based on themes that have emerged from questionnaire responses by the staffs.
3.8.3 Observation
The research was a complete participants during the research. Focused observation was used as part of collection of data. The focus areas were SCOM income generating activities, Capacity of Staff, finance policies and other documents and segregation of duties
3.9 Data analysis and interpretation
Data analysis involves data preparation where data is checked for accuracy, entered into a Computer, examined critically and making inferences, Kombo and Tromp (2006). Immediately the questionnaires were received, they were checked for accuracy. This was done by checking whether the responses are legible, whether all important questions have been answered and whether the responses were complete. Data was analyzed using excel. In this study primary data was augmented by secondary data. The triangulation method was employed
3.9.1 Quantitative data analysis
Data from questionnaire was analyzed using the statistical package for social sciences EXCEL to produce descriptive numerical analysis, specifically, bar graphs, tables and charts were developed and used to analyze quantitative data
3.9.2 Qualitative data analysis
The analysis of qualitative data followed the following steps as outlined by Rossman and Rallis (2002) and agreed by Cresswell 2009:
Firstly the data was organized by transcribing the interviews, arranging it into different types (departments, position) and editing the field notes so s to clean up the data
Secondly the data was read through again and again so that the researcher can familiarize in intimate ways with what was collected and get a general picture. Coding which refers to the process of organizing the material into segments of texts before bringing meaning to the information was also done. These categories and themes that were generated led to data interpretation
3.9.3 Data interpretation
Data interpretation is the process of attaching significance to what was found, offering explanation, drawing conclusions and explaining the lessons. In doing this was seen during the research as well as symbols and signs which were noted through observation and what participants said through the interviews was put together into an experience that made sense.
3.10 Triangulation
Methodological triangulation entails combining both quantitative and qualitative data collection methods (Banister et al. 1994). This is based on the rationale that a single data collection method is insufficient to provide adequate and accurate research results. It is vital to remember that the above-mentioned method is also a form of comparative analysis where the interpretation of the results is complicated when the convergence of data leads to inconsistencies and contradictions. Such being the case in this study the researcher used both qualitative and quantitative data to triangulate.
3.11 Validity, reliability and generalizability
According to Mugenda and Mugenda (1999), the reliability of an instrument is the measure of the degree to which a research instrument yields consistent results or data after repeated trials. In order to test the reliability of the instruments that were used in the study, a pilot study was conducted at ministry of hope involving four (4) respondents In this study, the reliability was improved through minimizing external sources of variation say boredom, fatigue, or poor logistics and standardizing the conditions (improving the equivalence aspect) under which the measurements was done by carefully designing the directions for measurement or measurement guide. In order to achieve content validity of the instrument, a general agreement on what constitutes adequate coverage of the problem was made by a panel of other persons. In order to achieve criterion validity of the instrument, all the team members involved in the research was given an equal chance to score well. In order to achieve construct validity of the instrument, the researcher kept on checking for variances in the results. Subsequently, the researcher required to keep on asking themselves the reason for the observed variance.
3.12 Limitations and Delimitation
A) Time: The researcher had a limited time to do the research because of pressure from balancing work and school. This was solved in a way that the researcher had to reduce time spent to do the research especially data collection.
b) Expertise: The individuals who required to give information some had no relevant information. The researcher had to find some other ways to simplify the questionnaire by interpreting it in the language that the people that could understand.
3.13 Ethical consideration
The study of this nature required care in observing confidentiality. The study was to be conducted with the full knowledge and permission of the organization. This allowed the researcher to have access to vital information and data including possible respondents. The purpose of the interviews was explained to the participants in solicit their consent before conducting the interviews. The participants’ privacy was assured in terms the respondent’s names was not recorded so that their response remains anonymous. Anybody who did not want to participate was free to refuse or withdraw. The results of the study will be for scholarly persuasion only and not harmful to the individuals or any institution including the student Christian organization of Malawi.
3.14 Chapter summary
This chapter has presented the overall design and the methodology that this study employed. The study employed both qualitative and quantitative approach, exploratory, explanatory research design and strategy.
The data collection instruments that were used have been discussed and explained and these are as follows: questionnaire, interview guide and observation. The way the instruments were designed has been discussed. The chapter has given a detailed explanation on how the data was analyzed and managed. Finally ethical issues as well as limitations of the study have been discussed
CHAPTER 4. RESULTS AND DISCUSSION
4. Introduction
This chapter covers data presentation and analysis. The main objective of the study was to determine the effects of organizational structure on financial performance of student Christian organization of Malawi. The findings were drawn from the study carried out through questionnaire, face to face interviews and observations. The researcher adopted mixed approach that is qualitative and quantitative approach. In order to simplify the discussions, the researcher provided tables and figures that summarize the collective reactions and views of the respondents. Fundamentally this study was guided by a set of objectives as follows:
- To investigate the effect of organizational size of on the financial performance of Christian organization of Malawi
- To characterize current structure formalization of student Christian organization of Malawi
- To assess current structure centralization structure of Student Christian organization of Malawi
The first section is primary data analysis and the second section is secondary data analysis presents and these are discussed in reference to literature review.
4.1 Primary data analysis
The data collected is presented firstly by proving the background characteristic of respondents from where the data was collected and secondary results based on the objectives. It has been arranged like that because the background chacteristics were felt to have an effect on financial performance of SCOM
4.1.1 Demographic Characteristics of SCOM Staff.
The study sought to establish the demographic information in order to determine whether it had influence on effect of organizational structure on financial performance of student Christian organization of Malawi. The demographic information of the respondents included age, gender and education levels of the respondents
4.1.2: Gender of Respondents;
The researcher wanted to know what type gender is more prevalent in student Christian organization of Malawi and its impact on financial performance of the organization. The figure below displays demographic information according to gender;
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Figure 4.1: Gender of respondents of student Christian organization of Malawi
According to the analysis it was evident that majority of the respondents were female. This means that females were the most dominant gender in student Christian organization of Malawi. Females as a dominant gender it may have an impact on financial performance as females are emotional and at times they do not think in rational way. This is in support what Mcknisey and company (2007) stated that in gender diverse organizations there is likely to be a better financial performance and a great direction, coordination and control, and of leadership. One the other hand, in organizations lacking gender diversity they are likely to have poor coordination hence resulting to poor financial performance.
According to Mckinisey and company possible explanations for the findings included those organization that women dominates are likely to improve financial performance. Women have greater analytical skills and coordinate activities with much (greater) ease than men while upholding company values and strategy” (Mathews Daniel Kapito 2007): they further said that however women are too emotional compared to men so at times when women are dominant gender in organization it may affect the financial performance of an organization .This means that in SCOM since majority of the staff are women this might have an effect on financial performance
4.1.3 Age Diversity
The researcher wanted to find out if student Christian organization of Malawi has age diversity and to infer experience and maturity of individuals which have a direct effect on financial performance. The findings are shown in figure below
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Figure 4.2: Age diversity in student Christian Organization of Malawi.
It was find out there is diverse in age in the organization. However though there is age diversity in student Christian organization of Malawi the staff are just a few and this affect decision making and performance this is in support what Stanford( 1999) he said that age diversity in organization stir constructive debates which also helps to improve organization performance through constructive decisions. He also said that diversity in organization always bring out fresh ideas. Findings also showed that the dominant age is between 20-30 years perhaps because this age group has just obtained a certain qualification and need immediate employment.
Level of Education of the Respondents
The researcher wanted to find out the respondents level of education of employees and if they have capacity to perform. Education was area of concern as it contributes much in understanding of issues of financial management. The findings are shown in figure below
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Figure 4. 3: Level of Education of the Respondents
From the findings it was shown that majority of employees of student Christian organization of Malawi are diploma holders. Education is important when it comes to financial performance.This is in reference to what kasika (2015} said that employees with higher education qualification contribute more to organization financial performance compared to those with less. According to paige theory of development this may suggest that understanding would be easily be enhanced where individuals are the same education level yet there several areas in the research that points a greater diversions of issues.
4.2 The extent to which current Structure centralization factors affect financial performance;
The researcher sought to find out the extent to which certain factors affect the financial performance of Student Christian Organization of Malawi. Centralization is more concerned with decision making and decision making is critical in any organization .The findings are indicated as follows
4.2.1 Department meetings on financial issues are conducted on regular basis
The research wanted to find out if departments meetings are conducted on regular basis, the researcher used monthly basis to measure how often these meetings are conducted. Meetings are important in every organization financial performance because it is during staff reflect which areas of financial performance needs improvements and make other critical decisions. The findings are shown below
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Figure 4.4: Response chart on the statement that ‘Sections / departments formal meetings on financial issues are conducted on regular basis’
Therefore the findings conclude that section and departments formal meetings are conducted regularly on regular basis in student Christian organization of Malawi. However when some departments were interviewed if they have minutes for meetings they was no evidence of the minutes. Only department of administration was able to produce documented meeting monthly meetings. This may suggest that the other departments perhaps they do not conduct monthly meetings or they do not document they meetings. Njiru (2014) they stated that work place meetings have an effect on organization financial performance because work place meetings help people to make better decisions as meetings help an employee to understand things from their own perspective. They also said that in case of cross departments meetings people may contradict each other but at the end of the day they always come to a better decision that may help to improve organization financial performance. It also said that as modern organization are complex and if individuals try to solve problems on their own without conducting meeting with their fellow staff solutions are limited at their best and that’s why organization meetings need to be conducted on regular basis to improve financial performance. Documentation of minutes acts as evidence that meetings are being conducted in organization and also acts as a reference point. This may means that in SCOM even if a decision is made during a meeting there is no reference point of that decision and the probability of that decision not to be implemented is always high.
4.2.2 There formal organization financial guidelines
The researcher wanted to find out if there are formal guidelines on activities in Student Christian Organization of Malawi. Financial Guidelines are important in every organization as they act as indicators on how to carry out a particular activity hence improve financial performance of an organization. The results are shown in figure below
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Figure 4.5: Response chart on the statement that ‘formal financial guidelines are available to staff’
From the findings this means that that there formal guidelines on how to deal with every operational activity in student Christian organization of Malawi since it was 49% who strongly agreed.
However interview questions indicated that staff do not have documented financial guidelines on how activities are to be conducted and other staff do not know what operations guide lines are in place for SCOM that they carry out organization activities without proper guidelines. Without proper financial guidelines staff do whatever they want in organization and partial implementation of guidelines affect financial performance of organization. This is in support with ACCCA(2009) which says organization do not operate in a vacuum and not following guidelines affect the reporting and presentation of the financial statements and there is a need for organization to fully implementation financial guidelines and make sure there available to every staff
4.2.3 There are written communication regarding financial matters
The researcher wanted to find out if there any written formal communications established regarding to financial matters. Communication is avital in every organisation and without proper communication there misunderstandings . written messages carries weight compared to verbal communications . there researcher wanted to find out if there written communication on financial matters.The results are shown in figure below
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Figure 4.6: Response chart on the statement that ‘Written formal communication on financial matters’
From the findings this means that that there written formal communication written regarding to financial matters for student Christian organization of Malawi since it was 52% who strongly agreed there is written formal communication for student Christian organization of Malawi.
Evidence by observation showed that there several channels of communication are used in SCOM such as memos and email in SCOM though some other communication are done face to face to communicate about financial matters. Kreitner (2004) said communication provides feedback and feedback is essential in effective management and to financial performance of organization.
4.2.4 Every position has a written job description and every staff knows there duty
The researcher wanted to find out if every position has a written job description and if every staff knows there duty in the organization. Every organization works towards achieving its mission and vision and the mission of SCOM is to be a financial stable organization and for workers to perform they need to know what they will be working on, their job description and this will help organization to have a better financial performance. The results are shown in table below
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Figure 4.7: Response chart on the statement that ‘ Every position has a written job
Description and every staff knows there duty in the organization’
From the findings it was shown that every position has a written job discription. However Interview with the Human resource person also confirmed that in SCOM every position has a written job description. This is in support to what miller said.Njiru (2014) he said job description assist in making sure staff duties align with organization vision. SCOM vision is to become a financially table organizations and if staff knows their job description it will help in improvement of SCOM financial performance. Job description can be used to determine areas in finance which will need development when expectation or requirements are not being mate. Job description can be used as performance management .For employees having a clear description allow them to understand the responsibilities and duties that are required of them and this can improve organization financial performance.
4.2.5 Financial policies procedures and manuals are available
The researcher wanted to find out if financial policies and procedures manual are readily available to staff. Policies are vital in every organization as they indicate how activities should be carried out. The results are shown in table below
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Figure 4.8: Response chart on the statement that financial ‘Policies and procedures manual
Availability’
It was found that policies and procedure manual are available to staff. However interviews indicated that policy documents are not reviewed often and though documented some of other staff members do not have these documented policies in their hands. Njiru (2014) they said Policies act as a guiding frame of reference for how the organisation deals with everything from its day- to-day operational problems or how to respond to requirements to comply with legislation, regulation and codes of practice hence this improves financial performance. Further the journal indicated the indicated the following as the roles of financial policies in an organisation.
- Demonstrate that the organisation is being operated in an efficient and business-like manner
- ensure uniformity and consistency in decision- making and operational procedures
- save time when a new problem can be handled quickly and effectively through an existing policy
- Foster stability and continuity
- maintain the direction of the organisation even during periods of change
- provide the framework for business planning
- assist in assessing performance and establishing accountability
- clarify functions and responsibilities
Figure 4.2.6: formal orientation program are available for new staff
The researcher wanted to find out if there formal orientation program for new staff on financial matters. Orientation is important in every organization as it helps staff to know what they are supposed to do. The results are shown in figure below
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Figure 4.9: Response chart on the statement that ‘there is formal orientation program for new members of staff’
It was found that there is an orientation to new members of staff. However because of low education level qualifications the researcher suggested that for some members of staff they do not grasp the concepts of finance and this affect the financial performance of the organization. This is in line with journal of finance (2006) orientation of new staff on financial matters helps in the following ways.
- Provides the new employee with the concise and accurate information to make him/her more comfortable in the job
- Encourages employee confidence and helps the new employee adapt faster to organization financial policies
- Contributes to a more effective productive workforce
4.3 Current formalization structure of student Christian organization of Malawi
The researcher wanted to assess the current formalization structure and how it is affecting financial performance of the student Christian organization of Malawi. The results are as below
4.3.1 Hierarchy of decision making in SCOM
Decision making is crucial in every organization. Decisions can help organization to improve its financial performance or to worsen its state. The researcher wanted to find out the financial hierarchy of decision making in SCOM. The results are shown in the table below
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Figure 4.10: Response chart on the statement that ‘that there is a few hierarchy before a financial decision is made’
From the findings it was found that there are few level of hierarchy before a financial decision is made. Therefore the findings conclude that in student Christian organization of Malawi (SCOM) financial decisions there is a hierarchy before a final decision is made. In reference with the organization Organogram of student Christian Organization decision making in student Christian organization of Malawi is bottom up. The final decision is made by the board who are the principals of the organization which shows the hierarchy of decision making in SCOM. Hierarchy of decision making shows decentralization.
Kreitener (1989) said decision making tends to be centralized in mechanistic organization which are rigid, command and control bureaucracies and decentralized in organic organization which are fluid and flexible networks of multitalented people. Decentralized decision making occurs when important decisions are made by middle and lower level managers , generally centralized are more tightly controlled while decentralized organization are more adaptive to changing situation. When most decision is pushed to lower level managers the result is always promising.
Njiru in (2014) talked about participative management he said it about involving employees in various aspects of decision making. He said an organization needs to maximize its workers potential and this can be done by making sure workers participate in decision making and this can improve organization financial performance.
4.3.2 There is established department for every position in the organization
The researcher wanted to find out if there any established departments for every position. Different departments shows that there is a demarcation and there is no conflicts and confusion when staff are carrying out various activities .The findings are shown in table below
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Figure 4.11: Response chart on the statement that ‘there are established departments for
every position’
This means that for every job there is a department. In reference with SCOM organogram it shows that for every position there is established department but in reference to organization size SCOM has only 35 staff across the country and though a department is allocated a specific duty it may find itself carrying out other activities outside their allocated duties and they may not produce desired results hence affect financial performance.
Observation find out there the following departments in SCOM the following were mention, Administration, projects and student outreach this is in support to what Cole (2001) said that every organization having more individuals will need a structure and departmentalization is part of it to avoid confusion and losses. He also said that departmentalization helps to see which departments in organization need capacity building that all departments contribute to financial performance as a goal of every organization is to be growing and not to be out of business.
Figure 4.3.3: There is more than one income generating activities
The researcher wanted to find out how many income generating activities student Christian organization have to improve its financial performance. Though the organization has donors for sustainability in needs also to generate income to keep going for a foreseeable future. The findings are shown in the figure below
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Figure 4.12: Response chart on the statement that ‘there is more than one income
Generating activities’
This means that SCOM has other income generating activities .In reference with the organogram of SCOM there is the Finance and Investment department and this department oversee SCOM investment activities according to SCOM (2016-2021) strategic plan it shows that SCOM has a number of investment activities such as selling of airtime, t-shirts, cards, mag cups and meaning there is a room for diversification. ACCA (2009) says diversification is the most important component of reaching long –range financial goals while minimizing the risk.
However looking at the financial statement from2008-2016 SCOM has been in deficit despite its investment activities
4.3.3 Department financial Decisions are approved by the Board
The board which are the principals of the organization plays a critical role in every organization. The researcher wanted to find out the role of the board in approving financial decision for student Christian organization of Malawi to improvement of financial performance. The results are shown in figure below
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Figure 4.13: Response chart on the statement that ‘Department decisions are approved by the board’
From the findings the researcher conclude that SCOM decisions are approved by the board.in reference to agency theory the board at times may act out of their own interest and this may affect their relation with the agents who are the staff and the end of the day this may affect the financial performance of the organization
Observation showed that SCOM has 6 board of directors. This is in support to what Amos (2016) said that one of the role of the board of directors is to help in decision making, giving management to wealth of skills, experience and connections and the 57% shows that the department decision cannot be carried out without the approval of the board. Staff are limited to conduct activities anyhow in their various departments and this helps that finances to be utilized only on activities that are outlined in work plans and finances to be utilized accordingly hence improving performance.
4.3.4 Participation in financial decision
As decision are important every organization it is also very important that staff should participate in decision making .The researcher wanted to find if subordinates partake in financial decision making in SCOM. The results are shown in table below
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Figure4.14: Response chart on the statement that ‘Subordinates participate in financial decision making
From the findings it was conclude that in SCOM not all subordinates participate in financial decision making. However even though subordinates participate in decision making it was found out that most decision are only approved by the board because it is the ones who holds the final say in every decision and this also brings back agency theory where there is a conflict of management between the board and the staff. This supports what Njiru (2014) said that involving subordinates in decision making act it is a motivation to employees to work hard and improve their job performance. He describes motivation as an internal state that induces a person to engage in particular behaviors and he said a motivated staff can help organization to achieve financial stability’
4.3.4 Investment decision are approved by the board
Investment decisions are important for every organization. Organization invest their money to increase capital. The researcher wanted to find out if the board approves all investment activities or they are just done without their approval. The findings are shown in table below
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Figure 4.15 Response chart on the statement that ‘all investment decision must be
Approved by the board’
Therefore this means that in investment decision are approved by the board and staff has a little say in such decision, perhaps this is one contributing factor to conflicts. This is in support to what Amos said in (2016) that the board plays a crucial role in an organization and one way is by giving better direction and commending decisions, not all investment decisions are viable and the board has to analyses on portfolios which will be beneficial to the organization and which will bring profits. ACCA (2009) points out that when it comes to investment decision there so many things involved for example the source of finance if an organization will start from a scratch or use debt financing when investing and these are all crucial decision in an organization and needs board’s approval as at the end of the day they affect financial performance of an organization.
Figure 4.4.5: operational activities are approved by the CEO
The researcher wanted to find out if the CEO approves all operational activities in student Christin organization of Malawi. The findings are shown in figure below
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Figure 4.16: Response chart on the statement that ‘all operation activities are approved by the CEO’
Therefore the findings conclude that in SCOM operation activities are approved by the General Secretary. On observation it was found out that when every memo is written the General Secretary who is SCOM general secretary analyses the memo and has the right to approve or disapprove any memos content but even if the General Secretary approves the decision it is the board that has the final say. The General Secretary in this case is an agent of the board of directors who are the principals. Agency theory is used to understand the relationship between the agents and the principals the General Secretary represents the board in this case approving or disapproving all operational activities as every agent has to make sure to help the principal achieve their mission and this conflict of management affects financial performance of the organization.
4.4. 6: Adoption the researcher wanted to find out if staff are asked their input when it comes to adoption of new financial policies. Policies are important in every organization. Better financial policies help to improve performance of an organization. The findings are shown in the figure below.
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Figure 4.17: Response chart on the statement that ‘Staff are asked their input o adoption of new financial policies’
Therefore the findings conclude that in SCOM staff are asked their input when it comes to adoption of new policies. However even when new policies are formulated it is the board who has the final say on the formulated policies and at times it is not easy for the staff to corparate.
Kreitner (2004) said every human personnel is an organization asset and seeking their input on every organization activity acts as a motivation and this help them to perform beyond their expectation. Therefore this may improve organization financial performance.
4.3.5. No or Little action can be taken by staff without consulting superiors.
The researcher wanted to find out if subordinates staff can carry out activities without consulting their superiors. The findings are shown in figure below
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Figure 4.18: Response chart on the statement that ‘No or little action can be taken by staff without consulting the superiors’
Therefore the findings conclude that in SCOM some staff can carry out their activities without consulting their superiors. However interview question indicated that staff can carry to their activities only when there memo is approved by the General Secretary and the board and 51 % agreed that all operational activities are approved by the General Secretary so even though 34% agreed that in SCOM staff can carry out activities without the superiors consent it was also indicated that activities are carried out only if the Board and approves General Secretary approves. Staff who carry out activities on without approval of superiors at times carry out activities for their own benefit and at the end of the day they contribute to financial performance of the organization.
4.4.8: Accountants are held in the name of organization and not individuals. The researcher wanted to find about if bank account are held in the name of organization or individuals. an organisation/ business is a separate entity andaccounts are supposed to be in name of organisation not individuals . Th e findings are shown in figure belowAbbildung in dieser Leseprobe nicht enthalten
Figure 4.19: Response chart on the statement that ‘Accounts are held in the name of organization’
Therefore the findings conclude that in SCOM all bank accounts are held in the name of organization and not individual . This is in support to what ACCA (2009) stated that every business is a separate entity. The separate entity concept states that organization/ business should always separate record of transaction of a business and its owners otherwise they risk that the transaction of the two will intermingle so since a business is separate entity it is viable that the accounts should be held in the name of organization and not that of individuals. The owners and the business are separate entity and should be accounted for separately. The business separation is useful for financial statement users. They can differentiate between the actual company activity and personal activities and there for it is vital that business should account should be held in the name of the organization and not individuals. Organization that follow financial procedures are likely to attract investors and donors hence improve their financial performance.
4.3.6 Organization Cash books are reconciled every three months
The researcher wanted to find out if organization cash books are reconciled to bank statements every month. Reconciliation is important for every organization and reconciliation helps to reflect a true picture of financial matters .The findings are shown in table below
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Figure 4.20: Response chart on the statement that ‘cash book balances are reconciled to the bank statement’
Therefore the findings conclude that in SCOM cash books are reconciled to the bank statement every month. Kreitener (2009) elaborated the following as importance of bank reconciliation;
Importance of bank reconciliation
A regular review of accounts can help to identify problems before they get out of hand.
Catch fraud: one of the main things to look for organisation look for is any sign of fraud. And common frauds are they check are;
- Were legitimate checks that you issued duplicated or changed, resulting in more money leaving your checking account?
- Were checks issued without authorization?
- Are there unauthorized transfers out of the account, or has anybody made unauthorized withdrawals?
Prevent problems: reconciling your account also helps you identify issues that might need attention. For example, you might need to revaluate how you handle cash flow and accounts receivable, or you might need to change your recordkeeping system and the accounting processes you use.
- Know how much you really have available in your accounts
- Avoid bouncing checks (or making failed electronic payments) to partners and suppliers
- Avoid bank fees for insufficient funds or going into lines of credit when you don’t really need to
- Know if customer payments have bounced or failed and if any action is needed
- Keep track of your outstanding checks
- Make sure everything is going into your accounting system properly
- Catch bank errors
4.3.7 Cash is kept in a safer Box
For organization to carry out its activities it needs cash Organizations have to make sure cash is stored in safer place. The researcher wanted to find out if organization cash is kept in a safer box especially the organization petty cash. The findings are shown in table below
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Figure 4.21: Response chart on the statement that ‘all cash kept in office is kept in a locked
Box’
Therefore this means that in SCOM petty cash is kept in a safer box and all remaining cash is kept at bank. This is in support to what Amos (2006) said that keeping cash in a safer box ensures the organization security of funds which are used for small transaction. Storing cash in safer box insures the mitigation of risk of losing cash by theft or other adversaries.
4.3.8 Financial manual is in place
The researcher wanted to find out if organization financial manual is in place. Financial manual helps to know that all financial procedures are in place The finds are shown in table below
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Figure 4.22: Response graph on the statement that ‘A financial manual is in place’
Therefore the findings conclude that in SCOM financial manual is in place since 62% strongly agreed however not every staff has documented manual in hand. Cole (2004) states out the importance of having organization financial manure and he gave out the following reasons
- Reduces learning curve/ training for new employees
- Ensures organization continuity for example when one is on leave the financial manual might help to ensure that things are still on track in the finance department
- Standardized process; it helps to ensure that things in an organization are standardized
4.3.9 Cheques signing
The researcher wanted to find out if there policies stating which member should sign cheques. Fraud is easy when there is no specific individuals which are signed to be signing cheques. The researcher wanted to find policies which state names of individuals to be signing cheques. The results are shown in figure below
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Figure 4.23: Response chart on the statement that ‘there are written policy’
Therefore this means that in student Christian organization of Malawi has written policies on who signs cheques. It is the board and the General Secretary who sign cheques in SCOM showing no individual can carry out task without their approval. Njiru (2014) in organization having specific member to sign cheques help to reduces fraud and it acts one internal controls to ensure proper financial management since in this case cheques are only signed by the designated individual.
4.3.10 Financial Transaction are authorized by appropriate member.
The researcher wanted to find out if each transaction is authorized by an appropriate member. In organization there is a need for transaction to be authorized by an appropriate member and this may help organization to have a better financial performance. The results are shown in figure below
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Figure 4.25: Response chart on the statement that ‘each transaction is authorized by an
Appropriate member’
Therefore the findings conclude that in every transaction is authorized by an appropriate member since it is the majority who agreed that each transaction is approved by an appropriate individual. However they was no documentation regarding to levels of authority. Documentation authority creates an expectation of responsibility and accountability Cole (2004) define authorization as the basis by which the authority to complete the various stages of transaction is delegated. The stages include the process of recording, approving and reconciling. He said that all activities should be carried by proper authorization as it prevents invalid transaction from occurring.
4.3.11 Accounts receivables are reviewed every three months
Accounts receivables is the money from debtors. Accounts receivables are asset of the organization and reviewing accounts receivables helps organization to know its stand when it comes to financial performance.
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Figure 4.26: Response chart on the statement that ‘ Accounts receivables are reviewed every three months’
Form the findings it was shown that in SCOM accounts receivables are reviewed after every three months. According to ACCA (2009) Accounts receivables being also known as debtors are assets of the organization. They are the dues from the credit customers or client. Effective management of accounts receivable is the great importance as it by increasing cash flows it leads to sound financial health and flexibility of a business entity. There various reasons for setting up accounts receivables in an organization. When goods or services are provided on credit a business records receivables that in turn increase the revenues.
4.3.12 Segregation of duties
The researcher wants to find out segregation of duties in student Christian organization of Malawi. The findings are shown in figure below
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Figure 4.27: Response chart on the statement that ‘Financial duties are segregated’
Therefore the findings conclude that in SCOM financial duties are segregated. However observation results were that SCOM is understaffed that in other departments do the financial transaction by themselves there is no segregation of duties
ACCA (2009) says it is important in business to have multiple people to complete one task. It says this plays a crucial role in risk mitigation. By having multiple people in one transaction a business can protect itself and its employees from potential error and fraud. It prevents one person gaining complete control overall single process thereby reducing the opportunity for such acts to occur. It is important company to set out clear roles and responsibilities for each job, by doing so this gives employees a through list of what there expected to do. By having proper checks and balances in place, business can catch errors and fraud immediately
4.5 Impact of Organization size on performance of Student Christian Organization Malawi:
The researcher wanted to find out the relation between organization size and financial performance of Student Christian Organization of Malawi .
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Table 4.1: short term assets, long term assets, income, annual turnover, surplus/ deficit
This sort to find out the impact of organization structure on financial performance in SCOM. The trend in the diagram shows number of years, annual turnover, short term assets, long-term assets and number of staff. The findings were that as number of staff is increasing and decreasing this have an impact on annual turnover, short term, long term assets and total assets that’s SCOM financial performance keeps changing according to number of staff
4.5.1 Working capital ratio In SCOM
This was used to measure SCOM ability to pay its current liabilities with is current assets. The reason this ratio is called the working capital ratio comes from the working capital calculation. When current assets exceed current liabilities, the firm has enough capital to run its day-to-day operations. In other words, it has enough capital to work. The working capital ratio transforms the working capital calculation into a comparison between current assets and current liabilities.
Example
Working capital ratio= current assets/ current liabilities
2008=3, 690 680/3 747 620
=0.98
Analysis of working capital ratio
Since the working capital ratio measures current assets as a percentage of current liabilities, it would only make sense that a higher ratio is more favorable. A WCR of 1 indicates the current assets equal current liabilities. A ratio of 1 is usually considered the middle ground. It's not risky, but it is also not very safe. This means that the firm would have to sell all of its current assets in order to pay off its current liabilities.
A ratio less than 1 is considered risky by creditors and investors because it shows the company isn't running efficiently and can't cover its current debt properly. A ratio less than 1 is always a bad thing and is often referred to as negative working capital.
On the other hand, a ratio above 1 shows outsiders that the company can pay all of its current liabilities and still have current assets left over or positiveworking capital ratio. Thefore as the trends indicate it shows that SCOM cannot cover its current debt
4.6 Return on Assets
This measure how effectively the organization produces income from its assets. And this is calculated by net income divided by company’s assets and multiply the quotient by 100
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Figure 4.28 SCOM Return on Assets
Return on assets measure how the company are using their assets to generate income this diagram portrays SCOM net income and assets and from the findings it was shown that that in SCOM from 2008-2016 the number of assets kept growing but there is a slight growth in net income. From 2008-2013 and from 2014 -2016 growth was stagnant.
4.10 Observation
Marshall and Rossman (1989) defined observation as the systematic description events behaviors and artifacts in the social setting chosen for a study. The researcher used focused observation during the research and the researchers was a complete participant; the following are the results of the observation
4.10.1 SCOM income generating activities
It was observed SCOM has income generating activities but it has other resources which are not used to generate income. The researcher found out this is because of current organization structure of SCOM which more power belongs to National Executive committee who are the associates and who approve all programs. The secretariat is given low mandate and this has resulted for SCOM not to utilize all its resources hence to improve its financial performance.
4.10.2 Capacity of staff
It was observed that most staff in SCOM needs capacity building to carry out some of activities this is true by looking at the descriptive results on the level of education it was find out that majority of SCOM staff are diploma holders and the researcher observed that some staff have difficulties to deliver desired results because they do not have the capacity to grasp financial concept and this also affects the financial performance of the organization.
4.10.3 Financial policies and other documents
The researcher also observed that policy documents like the financial policy manual it is only available in the finance department and other staff does not really know the content of the document as a result they at times carry out financial transaction without proper guidance and at the end of the day this affects the financial performance of the organization.
4.10.4 Segregation of duties
The researcher observed that workers in district offices carry out duties by themselves, there is no segregation of duties, they handle all financial transaction and operation activities all by themselves which is a challenge when it comes to handling finances and accountability and this affects the financial performance of the organization.
4.11 Interview questions
Interview question analysis
4.11.1 Staff motivation
The researcher wanted to find out how the current structure has helped individuals to achieve job satisfaction hence motivated to improve financial performance of their organization. The findings are shown in table below
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Table 4.2 organization structure and job satisfaction
From the findings 5 people answered that it was through delegation of work they have achieved job satisfaction, 2 people said through promotion they have achieved job satisfaction and another 3 said through recognition when they have done something they have managed to achieve job satisfaction and we can conclude that delegation of work in important to motivate staff. A well-motivated staff perform better and can help in achieving a better financial performance. According to the journal of behavioral science (2011) organization today strive and make sure that employees are satisfied with their work as this improves financial performance.
4.11.2 Individual satisfaction with current structure
The researcher wanted to find out if individuals are satisfied with their current organization structure and the findings are shown in the table below
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Table 4.3 employee’s satisfaction with current structure
From the findings 3 people said there are satisfied with their current organization structure, 4 people said there not satisfied with their current structure and one individual said he is partly satisfied. From the results we conclude that people are not satisfied with the current organization structure. A satisfied employee is a motivated employee and motivated employee are likely to improve the financial performance of the organization Cole (2009).
4.12 Organization structure
4.12.1 Decision making structure
The researcher wanted to find out what kind of decision structure staff prefers. The findings are shown in figure below
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Table 4.4 Decision making structure
From the finding 2 said they prefer centralized decision making 6 said they prefer decentralized decision making, 1 said they prefer group decision and another 1 said they prefer individual decision making. From the finding we conclude that staff from student Christian organization of Malawi prefer decentralized decision making. Decentralization making are flexible and gives room for everyone.
4.12.2 Improving financial performance of organization
The researcher wanted to find out what can be done in the organization structure so that there is improvement in financial performance. The findings are shown in table below:
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4.5 Improvement of financial performance
From the findings 1 individual said there is a need for incentives, 3individuals indicated that that there is a need for capacity building programs, 4 said that there is a need for increment of payment and 2 said there should be clearly defined roles in SCOM. The researcher concluded that that there is a need in SCOM to increase payments so that staff are motivated to deliver desired results hence to improve financial performance.
4.13 Financial Decision making in the organization
4.13.1 Who makes most financial decision in the organization?
The researcher wanted to find out who makes most decision in the organization and the results are shown in table below
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4.6 Financial decision making
Form the findings 3 said it is top level managers, 2 said it is middle level managers and 5 said the board. The researcher concluded that it is the board which makes most of the decision and seconded by top level managers and this has is true in most organization as there is conflict between the board and managers (Agency theory).
4.13.2 The researcher wanted to find out if it necessary for the board to approve financial decision
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4.7 Decision Approval
From the findings 5 said it necessary for the board to approve financial decision and another five said it is not necessary. The researcher conclude this might be so because of the agency relationship
4.14 Organization policies
The researcher wanted to find out if policies have impact on financial performance the findings are shown in table below
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Table 4.8Policies and financial performance
From the findings 10 said policies have impact on financial performance and the researcher concluded that policies are crucial in organization and they have impact on financial performance
4.14.1 The researcher wanted to find out how often policies are reviewed in the organization
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Table 4.9 Review of financial policies
From the findings 3 said once in every year, 5 said in every two years’ time, 1 said in every management meeting and another 1 said in every five years. The researcher concluded that in SCOM document review is done once in every two years
4.15 Secondary data analysis
This were findings from secondary data of SCOM strategic plan 2016 -2021
4.15.1 Staff Motivation
According to 2016-2017 strategic plan it says While SCOM has desired to recruit a high caliber staff team, it has failed to attract and retain them because the packages offered are very low and benefits are not attractive. The result has been that SCOM finds it difficult to fill existing positions within its staff ranks. It is however the desire of SCOM to review and improve on these packages so that it can attract and retains its qualified staff team and this has affected the financial performance of the organization. The following are the activities which the document propose to take place to have a qualified team
a. Establish finance and administration committee at NEC level to address staff welfare issues
b. Review the conditions of service of staff
c. Develop and/or implement mechanisms for addressing staff issues within the organization e.g. compensation packages, performance appraisal and other benefits
d. Develop formal and informal staff training programs
e. Conduct staff appraisal exercises every July and December
f. Attach staff promotion and annual salary increments to individual staff performance
g. Develop and implement mechanisms for recognizing and rewarding exceptional performance among staff members
h. Provide adequate office equipment for staff
i. Organize staff retreats regularly
4.15.2 Income generating activities
Lack of adequate finances has negatively affected the ability of SCOM to reach many students. It is thus necessary for SCOM to explore new ways of raising resources and of strengthening the existing efforts so that a stable support base is established to finance the vision. While SCOM remains a student ministry, very few students contribute towards the financial sustainability of the ministry. By denying the student a chance to participate in funding the ministry, we are denying him/her the opportunity to grow as a good steward of resources. Looking at SCOM mission that it should be a financially stable organization resource mobilization will be one aspect that will contribute to the stability of the organization (SCOM strategic plan 2016-2021)
4.15.3 Organization SWOT analysis
SCOM just as any organization is operating in an environment pose the threats as well as opportunities. The ability to manage these two forces depends largely on internal strength and opportunities. The following Table presents an analysis of the key threats, opportunities as well as internal strength and weaknesses.
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Response Rate
Sunders et al (2003) outline the importance of response in research. The targeted sample size was 35 respondents all SCOM staff workers. Those that filled and returned questionnaires were 35 respondents making a response rate of 100%. According to Mugenda and Mugenda (1999), a response rate of 50% is adequate for analysis and reporting; a rate of 60% is good and a response rate of 70% and over is excellent. This means that the response rate for this study was excellent and therefore enough for data analysis and interpretation since the rate was 100%.
4.16 Chapter Summary
The current study intended to analyze the effects of organizational structure on financial performance of student Christian organization of Malawi. Three variables have been identified to measure the financial performance of student Christian organization of Malawi organizational that is size, structure formalization, and structure centralization. Correlation analysis was incorporated to describe the strength and direction of the linear relationship between the two independent variables and the dependent variable on organization size and financial performance by looking at asset turnover. The results of the descriptive statistics reveal that the current structure formalization, structure, structure centralization and organization size affected the financial performance of the of student Christian organization of Malawi. In summary the findings in this study indicated that more could be done to improve financial performance of student Christian Organization of Malawi.
CHAPTER 5. CONCLUSIONS AND RECOMMENDATIONS
5. Introduction
The chapter provides the summary of the findings from chapter four, and it also gives the conclusions and recommendations of the study based on the objectives of the study. The objective of this study were to investigate the effects of organizational structure on the financial performance of the student Christian organisation of Malawi.
5.1 Conclusions
The following section highlights the conclusion based on the research questions
From the first objective of the study it was concluded that that there is a positive correlation between organisation size and financial performance. This was indicated by coefficient of correlation of 0.69. SCOM was established in 1961 however they have been a slight growth in organisation size which affect the financial performance. SCOM has currently 35 staff the whole Malawi for staff it is a challenge to deliver desired results since this staff have to work in different departments. Number of staff is important in any organisation because staff work towards achieving organisation goals. It was concluded that SCOM should consider its number of staff to improve its financial performance.
It was also concluded that the current formalisation structure of student Christian organisation of Malawi needs some improvement. The researcher focused on policies. It was found out that SCOM has financial policies that are in place but these policies are not documented and are not available to some staff. Further the study found out financial policies are not viewed often which may be a challenge. The study also find that though staff are oriented but to some it is a challenge to grass concept regarding to financial matters since majority of staff hold low level of education. It was also found that SCOM has a number of investing activities but the organisation has been making losses. This may was seen as perhaps because of poor financial policies and partial policy implementation.
It was concluded from the third objective that the current centralisation structure limits staff as staff cannot carry out any activity without the approval of the board. Waiting for the board to approve activities at times it is a challenge as it is time consuming and the board at times may act out of their on interest. It was found out that staff cannot make decision on their own. Even though it was found out staff are asked their input on adoption of new financial policies it is the board who holds the final decision. It was also found out there a few hierarchy before a decision is made staff do participate financial decision making but the board holds the final say.
5.2 Recommendations
Based on the study financial management recommendation of student Christian Organisation of Malawi are as follows.
5.2.1 From the findings on impact of organisation size on financial performance, number of staff come out clearly as one factor affecting the financial performance of Student Christian organisation of Malawi, therefore I recommend that SCOM needs to add its number of employees that there is segregation of duties and each number of staff are assigned to a particular duty
5.2.2 According to findings on the level of education it shows staff in Student Christian Organisation of Malawi hold low level of qualification. There is a need for the organisation to conduct capacity building trainings for its staff so that every staff knows the concept of financial management
5.2.3 According to findings that financial policies manual are in place SCOM needs to make sure that every staff have the manual and make sure that every financial policies are documented. If these policies are documented and every staff have them they will act as a reference point when there carrying out activities
5.2.4 The findings of the study also revealed that in SCOM departmental meetings are not conducted irregularly in other departments and there were no minutes to act as evidence that departmental meetings are conducted on regular basis. Meetings helps organisation to reflect which areas needs improvement their financial stand and documenting minute’s acts as a means of verification to see if what was agreed in a meeting is being achieved there fore I recommend that SCOM should conduct meetings regularly and document minutes
5.2.5 The findings clearly shows that SCOM has different investing activities but the organisation has been in financial crisis, therefore I recommend SCOM to consider and reflect its investment decisions. I recommend SCOM to employ someone who has capacity to help them in investment decision other ways the organisation will continue making losses
5.2.6 There is a need to priotise expenditures such that most pressing issues are spent on while they leave behind some funds for unforeseen circumstances otherwise the organisation will cease to exist
5, 2.7 they should be good relationship between the board and the staff so that they work hand in hand on every activity
5.2.8 SCOM should keep lean staff that is well qualified and pay them well and this will help the organisation to perfume well since money is a motivation
5.2.9 There should be good communication between employers and employees on financial matters
5.3 Practical contributions
These findings of the study have the following practical contribution to SCOM
a. Strengthening functional structures
Functional structures have to be strengthen through in-service training to ensure that the organization has quality of staff. The cost of training the employees can outwit the returns since best practice will be implemented and improve financial performance. Information management related to finances between employees and employers is crucial to avoid speculations. Good relation between employees and the board will also help to improve financial performance
b. Contribution to policy implementation.
SCOM mission is focused in having a financial stable organization and for this to happen it needs sounds financial policy implementation. Revelation shows that staff in SCOM have low level of education that to some they may not grasp the concept of financial matters this needs to be taken seriously if SCOM is to achieve its mission
5.4 reflection of the study
The study had several strength and weakness as shown below
5.4.1 Strength
1. The findings from this study shall help in the following area
2. Improve participation in decision making regarding financial matters
3. Improved financial management in SCOM
4. Improved organization structure
5.4.2 Weaknesses
The study was conducted to one organization as a result it is difficult to generalize the results findings. The results could only be applicable to SCOM
5.5 areas for further research
The researcher recommends the need for further study into impact of organization structure on financial performance in different institution and the relationship between structure and employee performance.
5.6 Chapter Summary
This chapter has dealt with conclusion based objectives of the research. The recommendation from the study should help Student Christian Organization of Malawi to improve its financial performance.
The implications on the theory and practice of the findings have been highlighted to show how the body of knowledge that has generated can be applied. The reflection in this study have provided the strength and weaknesses that are to be taken into consideration when using the findings of the study. Future research areas have also been highlighted to provide guidance on the areas that can help to improve organization structure and financial performance
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APPENDIXIES
Appendix 1: Cover Letter
TAMIKA KAMPINI
Exploits University,
Dear Sir/Madam,
RE: DATA COLLECTION
I am a postgraduate student at University of Exploits University undertaking a Master of Accounting and auditing degree Program. One of my academic outputs before graduating is a research project and for this I have chosen the research topic “Effect of organization structure on financial performance of Student Christian Organization of Malawi. You have been selected to form part of the study. This is to kindly request you to assist me collect the data by responding to the questionnaire. The information you provide will be used strictly for academic purposes and will be treated with utmost confidence. A copy of the final report will be available to you upon request. Your assistance will be highly appreciated.
Yours sincerely,
Tamika Kampini
Appendix 2: Research questionnaire
Topic: An Investigation of the effect of organization structure on financial performance.
Instructions
- This questionnaire consists of two sections: section A: general questions and section B: specific questions
- This questionnaire does not have a right or wrong answer so provide the appropriate answer according to your conviction by either ticking or filing in the spaces provided.
- The information provided will be treated confidentially and will be strictly used for academic purposes only
- Feel free to ask for clarification where necessary
SECTION A: GENERAL INFORMATION
By the means of tick (√) kindly indicate an option that best describes you where appropriate. Also fill in the blanks where necessary.
1. Date of completion of the questionnaire: …
2. Position of the respondent: ..
3. Gender (0) Female (1) Male
4. Age bracket:(1) 20 - 30 years (2)31 – 40 years(3) 41 - 50 years (4) 50 and above
5. Level of Education:(1) Diploma (2) Bachelor’s Degree (3)Master’s (4)Degree Doctorate
SECTION B: ORGANIZATION STRUCTURE
6. Size of organization in financial year 2015/2016:
A. Surplus/deficit achieved (kwacha.): ….
B. Number of paid employees: …
C. Number of volunteers..
7. On a scale of 1 to 5 (Strongly Agree (SA) =5, Agree (A) =4, Neutral (N) =3, Disagree (D) =2, and Strongly Disagree (SD) =1, Please rate the following statements below by placing a check (√) mark in the relevant box below:
Structure formalization
Abbildung in dieser Leseprobe nicht enthalten
Appendix 3: Financial performance Data correction form
Abbildung in dieser Leseprobe nicht enthalten
Appendix 4: Interview guide questions
1. Staff motivation
A. In what way has your organization structure helped you to achieve job satisfaction?
B. Are you satisfied with your current organization structure and how is the structure motivating you
2. Organization structure
A. What kind of decision making system structure do you prefer? Centralized decision making system or decentralized, and state the reason
B. What do you think can be done in your organization structure so that financial performance is improved
3. Financial Decision making in the organization
A. Who makes most financial decisions in your organization?
B. Do you think it is necessary for the board to be approving financial decision
4. Organization policies
A. Do you think policies have impact on financial performance?
B. How often do the organization review financial policies?
Appendix 5: Areas of observation
1. SCOM income generating activities
2. Capacity of staff
3. Financial policies and other documents
4. Segregation of duties
- Quote paper
- Tamika Kampini (Author), 2017, Impact of organisation structure on financial perfomance, Munich, GRIN Verlag, https://www.grin.com/document/434824
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