STRUCTURAL ALIGNMENT OF ORGANIZATION

Corporate strategies cannot be implemented in a vacuum. Organizational structure provides the framework within which
strategies are used and provide the necessary mechanism for its effective implementation and control. In the organizational
set up, the top executives of the firm have the final responsibility for ensuring the matching of its strategies with the
appropriate organizational structure and the changes that would be necessary when needed. The degree of organizational fit
between strategies and structure determines the firm attempt and influence in gaining market objective and its profitable
operation.
Effective stra tegic leadership presupposes the ability to select the most appropriate strategies and match it with the
appropriate organizational structure that would deliver the firm to its target objectives. Critical to this matching process is
the strong relationship of strategies and the organizational structure as it defines the duties and responsibilities of the people
in the organization and the implementation of effective control system.
The firms' effective performance in implementing its strategies is greatly dependent on the organizational structure.
Organizational structure specifies the firm's formal reporting relationships, procedurès, controlr and the authority and
decision making processes. The cause and effect in the global economy makes the crafting and designing the organizational
structure difficult as uncertainty in the world markets affects the structure system.
Typically, firms designed the structure that is complex enough to facilitate the use of its strategies but simple enough for all
to implement effectively. The dynamics of competitiveness in the business sector both in the local and foreign markets are
factors that take the center stage in the careful design of the organizational structure. The structural elements must be
properly aligned with one another that it will facilitate effective implementation of the desired strategies.
A firm structure specifies specific work to be done and the procedures to do it given the desired strategies. It influences how
managers work and implements decisions. The decision framework must be able to match with the strategies to be
implemented in order to get the desired results. Organizational task is completed primarily with strategies that fit in the
results. Structure supports these processes and completes the organizational task by implementing the planned strategies.
Effective structures provide the stability the firm needs to successfully implement its strategies and maintain its current
competitive advantage. Structural stability is the capacity of the firm to consistently and predictably manage its ongoing
activities and its daily routine without effect to its direction of profitable operation. Structural flexibility on the other hand is
the capacity of the firm to explore opportunities in the future, and shape the strategy for competitive advantage that will
generate successful operation. An effective structure allows the firm to exploit current opportunities and competitive
advantage while developing new ones to sustain present and future operations.
As the firm expands its operation due to new opportunities and with its competitive advantage, the firm must modify the
structure to fit the changes with new strategies. It is not fitting for the firm to remain in the structural status quo when
changes occur in the business environment as it will be counter-productive to the changes in the strategies. Top management
must act proactively in changing the structure and its corresponding strategies before the stockholders get its foot into the
problem. Changes in structure and strategies must be made before the firm experience performance decline as dictated by
market forces,
THE IMPORTANCE OF ORGANIZATIONAL CONTROL
Organizational controls are important aspects of structure. It guides the use of strategy and indicates performance standards.
It compares actual results from the projected outcome. When there is variance between results and expected outcome the
results is unacceptable. The effectiveness of control is therefore measured on the bases of the result against performance
indicators.
It is difficult to achieve competitive advantage without effective control measures that provide clear insights regarding
behavioral strategies that enhance organizational performance. Firms rely on strategic controls and financial controls as part
of their structures to support the use of strategies. The results of strategies in terms of increased performance at low financial
resources spent in achieving the goals are positive indicators of effective control system.
Strategic controls are subjective criteria. It is intended to verify that the firm is using appropriate strategies to achieve its
corporate goals and objective against its competitive advantage in both the external and internal environment. It tries to
examine the fit between what the firm can do on the prevailing opportunities with its present capabilities and competencies.
Effective strategic controls help the firm understand what it takes to be successful. It demands rich communication system
between operating managers and administrative staff who have the prime responsibility of implementing the strategic
actions. The communication linkage could either be formal and informal as coordination demands effective communication.
Characteristics of Strategic Controls
1. 1t helps firm understand what it intends to do.
2. They are subjective criteria
3. It examine what fits to be done
4. It demands effective communication
5, It verifies the sharing of appropriate strategies
Characteristics of Effective Financial Controls
1, Financial controls are effective indicators of performance
2. They are objective criteria that measure performance
3. It evaluates present performance against previous record
4. It is the indicators in safeguarding the corporate assets
5. It ensures that transactions are properly authorized
6. It provides reliable information in the use of financial resources.
Both strategic and financial controls are important aspects 01 each organizational structure. The structu ral effectiveness is
determined how strategic and financial controls interplay in the achievement of the desired profit objectives. Firms vary in
the use of strategic and financial controls. Diversified corporate organizations use more of financial control due to the huge
scope of financial data coming from different sources. Small organizations are usin o more of strategic controls due to
differentiation and subjective measures such as the effectiveness of product development teams in achieving performance
targets.
THE INTERDEPENDENCE OF STRUCTURE AND STRATEGY
There exists a reciprocal relationship between strategy and structure. Strategic formulation is the plan of actions while
strategic implementation is the extent by which the firm operates based on plans and goals. This reciprocal relationship finds
the structure with flowing strategies that can influence the achievement of its target goals and profit objectives based on the
firm's competencies and corporate advantage.
Once the structure is put in place it must influence the strategies that the firm pursues and develop future strategies. Any
changes in the structure will require reciprocal changes in the strategy on how the firm will complete its works in achieving
its corporate objectives. Under this direction of reciprocal relationships, firms must be vigilant and proactive to verify that
the structure calls for related work or activities that are based on the newly formulated strategy that is consistent with its new
structure.
In the development of firm's structure, top executives must see to it that there exists a reciprocal matching of the structure
and the strategy that provides the stability to use current competitive advantage. It must also provide flexibility that provides
future operational advantages. Based on previous discussions on sustainability, the strategy/structure matching must be
valuable, rare, and imperfectly imitable and cannot be substituted by the competitors.
PATTERNS OF RELATIONSHIPS BETWEEN STRATEGY AND STRUCTURE
Most firms started in simple structure as operation starts small especially when it starts as sole proprietorship. As the
business operation expands so is the organizational structure and in turn develops new strategies to cope with the expanding
business activities. Firms tended to grow in predictable manner. The following growth patterns are:
1. Increase in Sales Volume
As the firms increase its sales volume, they need new people to handlemarketing and distribution of its products then later
on develop Its own advertising agency to handle its promotional activities. New departments and units are created and each
department or units develop strategies to justify their respective role in the organization. Their strategies develop new
competitive advantage.
2. Geographical Distribution
Geographic distribution of products and services needs new breed of managers and executives who will handle the
provincial and regional activities to cope with the increasing demand of the market. Its regional managers develop strategies
consistent with their target goals and objectives. Sometimes geographic distributions are not limited to the home country as
expansion in product exports needs country managers and executives. As expansion worldwide increases so are the
strategies to cope with the demand of the organization.
3. Vertical and Horizontal Integration
This growth factor develops higher cal iber of executives who are trusted by the management in their strategies for corporate
growth. As new assignments are bestowed by managements and ifs board of directors, managers and executives will be
required to develop consistent strategies relative to their positions in the organizational structure. New departments are
created and new strategies are developed consistent with the goals of the new structure.
4. Product Diversification
The manufacturing of new product or the integration of new technology in the production of goods needs new structure and
at the same time developed new strategies to make the product survive in market competitiveness. Product diversification
needs people with new talents and develop strategies consistent with the diversified products that may be exported to another
country. Research and development strategies may be needed in the structural system of the organization.
5. Business Diversification
The development of new business organization that is consistent with the corporate expansion program to other business
venture needs a more elaborate structure that will deliver the desire profit and return on investments. The new business
venture must consistently develop a diversified strategy that could be entirely different from the mother corporation. This
diversified organization develop define structure and strategies that will analyze the internal and external environment and
develop new opportunities for its sustained operation and growth.
Based on the above growth patterns three major organizational structures were used to implement strategies.
1. SIMPLE STRUCTURE
In this simple structure the owner-manager makes all major decisions and su pervises all operations from production to
marketing of products or services. The employees serve as extension of the manager-owner who exercises direct supervision
of the daily activities. There exist informal relationships with few rules to follow and strategies are done on daily bases as
market demand dictates. Frequent coordination of functions is done and employees make it easy to follow simple
instructions from the owner/manager.
The simple structure is matched with focus strategies directed towards offering one line of products and usually concentrated
in certain geographic market. As the firm grows larger and the operation becomes more complex/ new employees are added.
Those who show loyalty and managerial competence through experience and hard work were given new duties and
responsibility to develop strategies that will contribute to business growth under the direct supervision of the
owner/manager.
The simple structure develops new strategies as market forces dictate new means of penetrating the wider market. New
competencies are developed and this needs new matching strategies to meet the growth factors. It also exerts pressure on the
owner-manager for more analysis of information, accounting, inventory system, distribution and new marketing strategies.
While some strategies remain the samet new strategies must be developed due to the need of more sophisticated work flows
and other integrated mechanism. As the firm moves into new evolution and expansion it will force the firm to move further
in structural re-alignment and meet the wider needs for more competitive advantage.
The simple structure in the view of management professionals is the development of line organization with simple direct line
of supervision and control through the direct line relationships between the owner/manager. Operational control and
financial controls are vested with the owner as supervisors are assigned to take care of the daily operations of their assigned
task. Coordination is direct and works are dictated through formal and informal means.

Advantages of Line Organization

 Ease of operation and control as few layers in decision making
 Few lines in the structure that facilitate communication
 Direct authority of executive that guides the work completed in cost leadership form
 Responsibilities can be pinpointed immediately that increase efficiency
 Strong focus on process improvement with highly formalized rules and procedure
 The structure contributes to low cost operational dynamics.
Disadvantages of Line Organization:
 Lacks system of specialization
 Limited opportunities for learning and growth
As business becomes more complex due to market expansion, new product development, increased market share and
regional expansion, the owner/ manager becomes more focused on strategic planning and busier with other functions with
industry leaders to which he is associated. The owner/executive needs the services of staff assistants and managers with
known capabilities to handle the day to day business activities under his direction rather. Immediate supervision and control
are delegated to trusted supervisors or managers who made the business expand to the present operation, or hire new blood
who he thinks is qualified to assist him as staff officers. This is the stage were the line and staff organization emerge.

Advantages of Line and Staff Structure]

 Services of staff assistant that develop better research and development strategies
 Greater horizontal and vertical communication
 Specialized functional areas that characterized differentiation form
 Delegation of authority and responsibility that takes action based information

Disadvantage of Line and Staff structure

 More executives to pay
 Jealousy among executives may exist
 Over confidence creates lesser control of operation

2. FUNCTIONAL STRUCTURE

Corporate growth and expansion is investable as the company expands in wider operation in market
growth and product differentiation strategy or at times expansion in other business operations. It consists
of operating officers in each unit with the board of directors as the policy making body while corporate
strategies are determined bv the chief executive officer with the concurrence of the board.

The functional managers are tasked with operational strategies in coordination with the other managers in the
horizontal functional setup. This structure allows for functional specialization that allows active sharing of
knowledge within each functional area thereby developing shared competencies for greater growth and expansion.
Knowledge sharing facilitates career path as well as professional development of executives. They operate also like
the line and staff structure but the business operates in more complex operation.
 a. Divisional Functional Structure

b. Divisional Product or Regional Structure

Corporate expansion may be in terms of product or new business. The functional structure along this
line could be more complex that the division of the firm into specialized area of activity within the mother
corporation. The mother company monitors the operation of its product division or regional operations
through its corporate board of directors. The chief executive officer or president, together with his
managers and staffs, develops strategies consistent with its mandate and reports directly to the board of
directors.

Effective communication and coordination must be put in place among the different operating units and must
provide control mechanism that they are operating within the goals and objectives of the mother corporation. While
the structure provides flexibility, the chief operating executive must work hard to verify that decisions and actions
of individual division and functional units are implemented; thereby promoting the entire firm rather than its single
functions. It must support structural implementation of business level strategies and some corporate-level strategies.

Advantages:
 Effective communication and coordination
 Effective sharing of knowledge and information
 Allows functional specialization that allows innovation
 Career path for executives and managers
Disadvantages:
 May have negative effect on communication
 Needs close coordination among units
 Few formal rules and regulations
 Need strong linkages of control mechanism

3. THE GROWTH OF MULTI-DIVISIONAL STRUCTURE

Most diversified corporations continue to grow and succeed not only in the local operations but also
internationally. Successful diversification requires analysis of substantially greater amount of data and information
when firms offer the same products and different markets diversified in foreign countries. Managing high levels of
diversification through functional structures creates serious consideration and control problems thus creating the
multi-level structural form.

KULLLLLLLAAANG (dugangi lang page 148)

The making of organizational structure should nol be good only on paper chart or for display in the frontal
office for people to know who is on top Of the organization and to know who is responsible on what operation. As
the organization grows more complex and operations become more expanded, the crafting of the organization chart
must involve the strategic cooperation not only of the top executives and the board of directors but also some line
executives who may contribute substantial ideas as they will operationally be the one to implement the
organizational system.

Strategy and structure influence each other. While strategy has stronger influence in the competitive advantage
of the firm, the firm tends to change the structure when operation dictates for either expansion or contraction. When
business condi lion prevails changes in the system, effective managers anticipate the need for structural change by
modifying structure to better accommodate the firm's strategic implementation as market forces dictate immediate
actions.

Increasing importance in the development of structure is the matching of strategy with the operational needs of
the organization. A strategy through which the firm seeks the local responsiveness of the multi-domestic strategy
and the global efficiency could be implemented through a combination of structure. The structural reforms must be
able to meet the globalization strategy as well as making strong local strategic actions to protect the local interest
and competitiveness.

The decision to centralize or decentralize, to integrate or disintegrate, formalize or non-formalize or a

combination of any of these structure is difficult to manage successfully without putting in place the strategic
control mechanism into the system. The success therefore of any strategic structural reforms must be based on
strategic actions that will put the firm in greater competitive advantage over other firms operating in the same
environment.

DIKO MAKITA RO DAYA SA UBOS A

structures consist of divisions different or

separate corporate officer delegate business
unit strategies. develops their own and are
self-contained
Structure
of business performance operational and
problem control as a separate center allocation
performance of executives and monitoring
for multi-level
may create vacuum in the committed
executives top executives often are may
deplete