DOES STRUCTURE COME BEFORE STRATEGY OR STRATEGY COMES BEFORE

STRUCTURE

THE CONNECTION BETWEEN STRATEGY AND STRUCTURE

Structure is all the people ,position ,procedures ,culture ,technology and related elements that
comprise the organization. It defines how all the pieces ,parts and processes work together .This
structure must be totally be integrated with strategy for the organization to achieve its mission and
goals .Structure supports strategy .If an organization changes its strategy ,it must change its structure to
support the new strategy ,.When it does not ,the structure acts like a bungee cord and pulls the
organization back to its old strategy.Changing strategy means changing what everyone in the
organization does.(Ansoff,1985)

STRATEGY FIRST…THEN STRUCTURE BY ALFRED CHANDLER

The historian Alfred Chandler of Harvard Business School wrote a seminal book published in
1977on the history of strategic decision making at the highest levels of corporate America
,including Dupont ,General Motors ,Standard Oil and Sears Roebuck .The book was called The
Visible Hand :The Managerial Revolution in American Business .In this work Chandler
proclaimed a maxim for the ages that has been followed by strategists and consultants alike ever
since .The maxim:

“structure follows strategy”

That is to say ,all aspects of an organizations structure ,from the creation of divisions and
departments to the designations of reporting relationships ,should be made while keeping the
organizations strategic intent in mind .

Strategy ,of course,lines up the arenas and markets in which a company will compete ,proclaims
a targeted customer base ,and asserts the matters by which the company will seek to differentiate
itself .Chandler described how the successful progress of the mid-twentieth century General
Motors can be attributed to the strategic foresight of Alfred P.Sloan ,who laid out the famous
divisions of GM :Chevrolet ,Pontiac ,Oldsmobile Buick ,Cadillac -listed here in order of pricing
segment and lined up with market segments -so that each division could seek to please an
intended customer segment.

This is a structure following strategy.Chandler showed that the need to reorganize -or to
“restructure “-is trigged by a specific shift driven by new technologies or market changes .
 The way that you organize your company or organization to optimize the pursuit of strategic
objectives is an important part of organizational design.Other design elements ,such as hiring and
personnel development practices ,communication and decision-making systems ,all must be
aligned around the chosen structure but first you must decide upon the optimal structure for
attaining your strategic objectives .

When considering achange in organizational structure ,keep in mind the following criteria for a
good structure:

I. Align the organization to best follow strategic direction.

II. Allow for clearly defined roles and responsibilities.
III. Clarify who makes what decisions as it enables accountability
IV. Minimize handoffs that affect the customer experience .Minimizes the customer
“runaround’.
V. Minimize handoffs that create confusion over who is responsible for what outcomes.
VI. Pull together the people who need to work closely with each other.
VII. Allow information to flow unrestricted to those who need it.
VIII. Create manageable spans of control

Generally ,there are five ways to structure a company or corporation :Organize by

function,product ,customer segment ,business process ,or matrix.Here are the pros and cons of
each:

I. Functional structure -this is based on the primary activities that have be undertaken by
an organization such as production ,finance and accounting ,marketing ,human resources
and research development .Such a structure divides responsibilities according to the
organizations primary roles.Functional structures are found in firms with a single or
narrow product focus and such firms require well-defined skills and area of specialization
to acquire competitive advantages in providing products and services .(mintzberg ,1987)
Pros
 People with a common profession work together so standards of performance are
well understood.
 People in a unit “talk the same language”.
  Easy to maintain stability.
Cons
 Conflicts arise between organizations/departments since priorities and objectives
often conflict.
 Decision making must be done at the top ,where a cross-functional team sits
together at the same table.
II. Organizing around product lines or programs
Pros
 Strong identification with products.
 High degree of coordination between functions.
 Can allow rapid response to market changes affecting a class of product .
 Employees can see big picture and relate to a common outcome.
 Opportunity for employees to learn other functions.
 Decisions can be made closest to those working on product ,more bottom-up
decision making.
Cons
 can lack coordinations between product lines.
 Functional or professional development can suffer as functional experts are
isolated from each other.
 Can be duplicaton of efforts across product groups .R$D can be parochial,only
focused on present clustering of products.
III. Organizing around customers or market segments
Pro
 Deeper understanding of customer needs .
 high coordination among functions aimed at meeting customer needs .
 more responsive to customers .
 greater flexibility within business units for purpose of adapting to needs of a
particular customer segment.
 Team members see the big picture .
 Innovation is customer driven ,
IV. Organizing as a business process
Pros
 Clarifies business outcomes at every stage of value delivery.
 Organizes people in such away that problems do not fall between the cracks or go
unattended .
 Enables people with common language across the organization ,making it easier
to identify and reinforce accountability.
 Facilitates cross-functional understanding of the business.
V.