Is Your Company’s Structure Aligned With Your Strategy?

Is Your Company’s Structure Aligned With Your Strategy?

9 min read

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:

1) Decision making is delayed or lacking in quality.

2) The organization does not respond innovatively to a changing environment.

3) 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).

Bradford (2001) emphasizes the importance of aligning your structure with your strategy, “Aligning everyone in your organization with your strategy is one of the most important things you can do beyond formulating and implementing great strategies. Alignment will make it much easier for your management team to push the organization in the direction you intend. Without good alignment with the strategy, every bit of forward motion will be a struggle.” (pg. 1).

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:

1) Specialization…the types and number of specialties to be used in performing the work.
2) Shape…. the number of people forming departments at each hierarchical level.
3)Distribution of power….the vertical distribution of decision-making power and authority…..and the horizontal distribution of power.
4)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. Bradford advocates five unique steps needed to implement alignment between your strategy and structure:

1) Employees must have the conceptual tools required for good strategic thinking about their work.
2) Employees must understand the strategy.
3) Strategic alignment needs to be built around the structure of the organization.
4) Strategy must be reflected in the structure of individual jobs – especially those in critical areas.
5) 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 January 10, 2005, from https://www.strategyletter.com/cp_1001/cp_fa.asp

Daft, R. (2004). Organizational Theory and Design. 8th Ed. South-Western. Mason, Ohio.

Development Dimensions International. Retrieved January 10, 2005, from
https://www.ddiworld.com/products_services/executingbusinessstrategy.asp

Edison, T. Retrieved January 9, 2005 from https://ktornado.tripod.com/khs/id13.html

Galbraith, J. (2002). Designing Organizations: An Executive Guide To Strategy,
Structure, and Process. Jossey-Bass. New York.

Landry, T. Retrieved January 9, 2005, from https://ktornado.tripod.com/khs/id13.html

Mintzberg, H. Ahlstrand, B., & Lampel, J. (1998). Strategy Safari: A Guided Tour

Through The Wilds of Strategic Management. The Free Press. New York.

Stalk, G., Evans, & P, Shulman, L. Competing on Capabilities: The New Rules of

Corporate Strategy. Harvard Business Review. March 1, 1992.

Comments to: gthomas@leadingtoday.org

About the author:

J. Hall C. Thorp is a partner of a private investment firm in North Carolina. Hall has an MBA from UNC-Chapel Hill, and is currently pursuing Doctoral studies while working full-time. As a result, Hall brings a unique perspective to the topic of strategic/structure alignment.

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