ALIGNING ORGANISATION
DESIGN WITH STRATEGY
PURVI SHETH
SHILPUTSI CONSULTANTS
STRATEGIC MANAGEMENT
Competitive
Advantage
Firm
•
Strategy
Shareholder
Value
Profit
• Competitive Advantage: ability to transfer inputs into goods and
services at a maximum profit on a sustained basis, better than
competitors
• Strategy: goal and set of policies designed to achieve success in a
particular
marketplace
• Key Issue: Increasing accountability of top management to
shareholders
WHAT HAS HAPPENED TO THESE
STRATEGIES IN THE LAST 10 YEARS?
• Universities / Educational institutions
• Automobile companies
• Telecom – service & product
• Retail – apparel / electronics / grocery
STRATEGY & STRUCTURE
• 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.
STRATEGY & STRUCTURE
• 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.
• 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.
THE RELEVANCE OF A STRUCTURE
• Organization structure must accomplish two things for the
organization. It must provide :
1. A framework of responsibilities, reporting relationships, and
groups,
2. It must provide mechanisms for linking and coordinating
organizational elements into a coherent whole
• 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.
STRUCTURE & STRATEGY ALIGNMENT
• 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 wearand-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.
THE IMPORTANCE OF ALIGNMENT
• 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.
THE EVOLUTION OF A STRUCTURE
• Organizational structure in most companies follow their
growth patterns; A simple structure in the beginning – the
family business for instance, with the mother or father as
the leader.
• A more defined functional structure as the company
grows will emerge. Here we would witness the beginning
of job specialisation, product based division structure or
Area based division structure as the company becomes
multinational, and a Transnational network or a Matrix
structure as the company becomes a global giant.
• Along with the evolution of the company structure along
with growth, Organizations are structured to reflect and
implement the corporate strategy.
RELATING STRUCTURE TO STRATEGY
• From your desired strategy, consider each component of your
structure from four policy perspectives. :
• 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 decisionmaking 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.
•
STEPS TO ALIGNMENT
1. Employees must have the conceptual tools required
for good strategic thinking about their work – WHAT?
2. Employees must understand the strategy – HOW?
3. Strategic alignment needs to be built around the
structure of the organization – IN WHAT WAY?
4. Strategy must be reflected in the structure of individual
jobs – especially those in critical areas – IDENTIFYING
THIS?
5. You must have buy-in to the strategy. WHO WILL SELL?
STEPS TO ALIGNMENT
• Although the first three steps appear elementary,
implementing these steps is not easy.
• 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
• 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.
STEPS TO ALIGNMENT
• 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.
INVOLVING PEOPLE
• Your people can make your strategies and structure
adapt to needed changes, but only if you involve them
in the process. - Structure determines the location of
decision-making.
• For companies seeking to empower those closest to the
customer, - Speed also means decisions must be moved
to points of direct contact with the work.
• 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?
LEADERSHIP & ALIGNMENT
• 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” .
• This requires your leadership in determining how you will go
about achieving alignment. You are the leader: now lead,
sweat, and make it happen.
EXERCISE
• Think of your own organisation in its ideal form and
draw a structure
• 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.
REFERENCES
• Bradford, R. (2001). Building Support for the Strategic Plan: Aligning
Employees
with Strategy. Compass Points. Retrieved January 10, 2005, from
http://www.strategyletter.com/cp_1001/cp_fa.asp
• Daft, R. (2004). Organizational Theory and Design. 8th Ed. SouthWestern. Mason, Ohio.
• Galbraith, J. (2002). Designing Organizations: An Executive Guide
To Strategy, Structure, and Process. Jossey-Bass. New York.
• Landry, T. Retrieved January 9, 2005, from
http://ktornado.tripod.com/khs/id13.html
THANK YOU