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Is Your Company’s Structure
Aligned With Your Strategy?
By J. Hall C.
Thorp
As a leader of your
company, you may have developed strategies, but is your company’s organizational
structure aligned in a way that such strategies can be fully achieved? Tom
Landry, former Head Coach of the Dallas Cowboys stated, “Setting a goal is not
the main thing. It is deciding how you will go about achieving it and staying
with that plan.” The “main thing” mentioned by Landry requires more effort than
merely developing a strategy. It involves a complete understanding of how
strategy and structure work in tandem, and the ability to tailor both of these
aspects of your company to achieve your objectives.
Strategies often
change over time; however, structures are usually much more static. Strategies are often decided in a boardroom.
In contrast, structural change can be mandated in the boardroom, but must be
implemented throughout the organization.
Compounding the difficulty of this challenge is when your company has
strategic or structural changes imposed upon it. For example, automobile
dealerships may have strategic changes forced upon them by automobile
manufacturers when the dealership’s structures are not yet designed to augment
this strategy. Such impositions are much more common today due to an increased
number of companies having strategic alliances, outsourced services, and
international competitors.
When your company’s
structure is not aligned with its strategy, the effects on your organization
are similar to when your automobile is not in alignment. Misalignment results
in wasted energy, unnecessary wear-and-tear on the organization and personnel,
fractured resources, and higher operating costs. How do you know when your
company’s structure is out of alignment with your strategy? Richard Daft (2001) lists three symptoms:
- Decision making is delayed or lacking in quality.
- The organization does not respond innovatively to a
changing environment.
- Too much conflict is evident. (p. 120).
Daft further
writes, “Organization structure must accomplish two things for the
organization. It must provide a framework of responsibilities, reporting
relationships, and groups, and it must provide mechanisms for linking and
coordinating organizational elements into a coherent whole. (pg.
120). Daft continues, “Managers can choose whether to orient toward a
traditional organization designed for efficiency, which emphasizes vertical
linkages such as hierarchy, rules and plans, and formal information systems, or
toward a contemporary learning organization, which emphasizes horizontal
communication and coordination……The organization chart provides the structure,
but employees provide the behavior. The chart is a guideline to encourage
people to work together, but management must implement the structure and carry
it out.” (pg. 121).
Daft includes an
organization’s structural form (i.e. learning vs. efficiency) as part of the
organization’s design, and couples this with a company’s information and
control systems, production technology, human resource policies and incentives,
organizational culture, and inter-organizational linkages. (p. 53). In this
manner, Daft maintains that organizational design influences strategic
direction, while also existing to implement such strategies. This tandem
relationship reveals the importance of having everyone throughout your
organization implement your strategy. Later in this article, we will discuss
how your company can achieve on-going alignment by having your staff actively
involved in balancing the strategic direction of your organization with your
structure.
In considering each
of the structural aspects Daft describes, what should your company’s structure
look like? First, from your desired strategy, consider each component of your
structure from four policy perspectives. Galbraith (2002) describes each of
these policy areas, or dimensions:
- Specialization…the types and number of specialties to
be used in performing the work.
- Shape…. the number of people forming departments at
each hierarchical level.
- Distribution of power….the vertical distribution of
decision-making power and authority…..and the horizontal distribution of
power.
- Departmentalization……the choice of departments to
integrate the specialized work and form a hierarchy of departments. (pp.
17-23).
Does each aspect of
your structure augment your strategy? Based upon your current structure, what
aspects of your strategy need to be adjusted? Once you have identified needed
changes to your strategy or structure, this process continues until your
organization has achieved alignment between your strategy and structures, and
also a plan for needed changes to both.
- Employees must have the conceptual tools required for
good strategic thinking about their work.
- Employees must understand the strategy.
- Strategic alignment needs to be built around the
structure of the organization.
- Strategy must be reflected in the structure of
individual jobs – especially those in critical areas.
- You must have buy-in to the strategy. (pp. 2-7).
Although the first
three steps appear elementary, implementing these steps is analogous to an
automobile technician fully diagnosing what corrective actions are needed to
align an automobile. These steps allow you and your staff to completely
understand your company’s strategy and structure.
The fourth and
fifth steps are to take the actual implementation steps to align, in tandem,
your organization’s structure to your desired strategy. These steps are
important and you must have the desire and tools necessary to take corrective
actions. Aligning your company’s strategy and structure, while making your structure
adaptable to future strategies often involves changes to hiring practices,
motivation of personnel, compensation, policies and procedures, marketing, reporting relationships.
Alignment may be
achieved by simply tweaking a few aspects of your strategy or structure, or may
involve a complete top-to-bottom overhaul. Using the automobile dealership as
an example, an automobile manufacturer that produces an automobile that orients
itself to sales by utilizing very attractive financing options, results in a
different structure for the dealership, than when this same manufacturer
changes their offerings to more luxury automobiles, that are not sold on the
basis of financing. If your organizational structure is aligned with one
strategy, you must adjust your structure.
In this instance, while the organizational chart may not change, the
compensation and empowerment of sales people likely will. What about the
service department? Owners of luxury cars will be much more inclined to
scheduled maintenance, and be very demanding regarding appointments. Will
hiring need to be changed to better serve these types of customers? Can
existing personnel become what is needed?
Development
Dimensions International (DDI) is a Human Resources consulting firm specializing
in assisting companies by aligning structures with strategies. They emphasize
that, “Developing business strategies is one thing;
but executing it is another. The best and brightest can set strategy, but their
efforts will be wasted unless they follow through with effective
execution.” DDI further states, “To turn
strategy into reality, leaders must be able to translate business strategy into
action, align organizational capability, and leverage organizational systems.” (pg. 1).
Once you determine
the need for aligning your organizational structure to your strategy, your
leadership will be the key to effective change. Stalk et.
al (1992) writes, “Because capabilities are
cross-functional, the change process can’t be left to middle managers. It
requires the hands-on guidance of the CEO and the active involvement of
top-line managers. (p. 65). It takes leadership to align structures with
strategy. Alignment will not happen
unless you, as the leader, make it happen.
Once you have
achieved temporary alignment, how can you create a method of continual
alignment? How can you make your organization more adaptive going-forward? Gailbraith (2002)
discusses the importance of adaptive organizations, stating, “In an era of
temporary advantage, you compete with your organization.” (p. 3). Does your
organization provide you with a sustainable competitive advantage? The answer
to this question involves empowering your people to assist in creating and
continually aligning strategies and structures.
Your people can
make your strategies and structure adapt to needed changes, but only if you
involve them in the process. Gailbraith writes, “Structure
determines the location of decision-making. (p.2). For companies seeking to empower those
closest to the customer, Gailbraith also writes, “Speed
also means decisions must be moved to points of direct contact with the work.”
(p. 6). As Mintzberg, et al. (1998) state, “Informed
individuals anywhere in an organization can contribute to the strategy
process….who is better to influence strategy than the foot solider on the
firing line, closest to the action?” (p. 178).
What is the end
result of achieving alignment? How do you know when you have finally gotten it
right? Galbraith states, “Organization
designs are effective when they achieve a strategic fit….A strategic fit means
effectiveness because congruence among the policies sends a clear and
consistent signal to organization members and guides their behavior. (p 171). Just as you know if your
automobile is in alignment, so too do leaders know when their strategies and
structures are in alignment. Various
aspects of your organization work in tandem to get you where you desire to be.
In conclusion,
Thomas Edison stated, “Genius is one percent inspiration, and ninety-nine percent perspiration.” So too, is the
relationship between strategy and structure. Are you ready to sweat to achieve
alignment in your company? As a successful leader, you have likely found that
changes in your organization regarding strategy and structure take your leadership. Such leadership is increasingly dependent
upon you empowering your employees to make decisions affecting your
company. It is up to you to make alignment happen. The process of aligning your
company’s strategy and structure is the “main thing” as Landry described. This
requires your leadership in determining how you will go about achieving
alignment. You are the leader: now lead, sweat, and make it happen.
References:
Bradford,
R. (2001). Building Support for the Strategic Plan: Aligning Employees
with Strategy. Compass
Points. Retrieved
Daft, R.
(2004). Organizational Theory and Design. 8th Ed. South-Western.
Development Dimensions International. Retrieved
http://www.ddiworld.com/products_services/executingbusinessstrategy.asp
Edison, T.
Retrieved
Galbraith,
J. (2002). Designing Organizations: An Executive Guide To
Strategy,
Structure, and Process. Jossey-Bass.
Landry, T.
Retrieved
Mintzberg, H. Ahlstrand, B., & Lampel, J. (1998). Strategy Safari: A Guided Tour
Through
The Wilds of Strategic Management. The Free Press.
Stalk, G.,
Evans, & P, Shulman, L. Competing on
Capabilities: The New Rules of
Corporate Strategy. Harvard Business
Review.
Comments
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About
the author:
J. Hall C. Thorp is a partner of a private investment firm in