RESEARCH PAPER ON STRUCTURE FOLLOWS STRATEGY
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INTRODUCTION
Structure follows strategy is a business idea that asserts that an organization’s divisions, departments, teams, procedures, and technology are all structured to help the firm achieve its plan.
This may appear clear, but in practice, the reverse frequently occurs. For example, Dangote Cement Plc’s technology department may build technology implementation strategies simply because it is what technology departments do.
Similarly, at the product level, if a corporation has a cement manufacturing department, that department will tend to develop strategies for better or more profitable cements, regardless of whether this corresponds with corporate strategy.
The goal of structure is to organise your resources in such a way that you can execute your strategy. So, before going on the quest to decide your structure, ensure that you have a clear direction. To create an effective organisation, you must be able to describe what the structure needs to enable.
If you intend to grow quickly or expand internationally, your structure must be scalable and capable of dealing with multiple time zones. If you want to introduce innovation into a traditional organisation, something has to change in the design to allow innovation to thrive, or it will be strangled from the start by bureaucracy.
When you consider how many firms use identical variations of the classic line structure despite having different goals and objectives, you might conclude that structures are independent of strategy.
It is easier to use the standard line diagram, but in the world of structural design, one size does not fit all. It pays tremendous benefits to obtain the structure suited for the goal of your very specific firm.
However, the notion “structure follows strategy” has been critiqued as overly simplistic. Indeed, it is overly deterministic. In actuality, enterprises have some degree of control about the organisational structure they apply, and the plan does not compel the Dangote group of companies to use a specific structure.
Furthermore, a company’s resource distribution, objectives, and decision-making processes are all influenced by its organisational structure. As a result, the organisational structure influences the strategy process, and “strategy follows structure” is sometimes true.
In a contingency viewpoint, Dangote Group must match their strategies with the external environment, such as industry requirements, and, as previously noted, variances in the external environment (e.g., different regions) may necessitate specific organisational structures.
Thus, some recent literature contends that there is no unidirectional influence of strategy on structure or vice versa, but rather that corporate strategy and corporate structure must be aligned with existing degrees of freedom, and both must conform to the external environment.
Structure must be aligned with values and espoused culture.
Your structural design will be shaped by your strategic, value, and cultural aims. If your value statements ever become more than just aspirational words on a page, and you wish to translate your professed culture into concrete action, this will have far-reaching ramifications for your structural design work.
If your declared value is ‘customer centric’ but your organisational design is entirely internal and lacks an external radar, you are introducing a fundamental clash of values into your structure, resulting in confusion.
If you declare that your personnel is your most valuable asset yet your company is driven by compliance and control, you will end up with disgruntled employees and high turnover.
Effective frameworks provide clarity, allowing everyone to rapidly understand how they should act and react to others both inside and outside. They are also congruent with the organization’s goals and objectives, ensuring that everything works in harmony. So, how should your structure be bent to genuinely connect with your ideals and evolving culture?
Size matters.
Small businesses with up to 12 employees typically operate as a family cluster. When they reach the ages of 24 to 30, they begin to function as an extended family, with everyone knowing everyone else.
The major changes begin when the group size exceeds our ability to function as a family. The more people there are and the more intricate the interconnections, the more well defined your structure must be.
By the time you reach 80 people, the family atmosphere has been replaced by numerous families, a tribe, or one of the organising principles outlined in the following section.
Some businesses try to impose heavy structures on small businesses that are still on the ‘family size’ end of the spectrum, which usually results in problems with unnecessary bureaucracy, slowing down the organisation rather than enabling it. It’s similar like trying on your father’s suit when you were a child.
There’s no reason to complicate structures too quickly. This essay is intended for organisations with 80 to 10,000 employees. Control concerns resurface in much larger organisations,
those with 50,000 or more employees. Some seek to address the issue by instituting a strict command and control culture focused on quality assurance, health and safety, and budget control.
Others allow divisional structures to adjust to specific local needs while keeping reporting structures constant and linked.
The Organisational Principle and Structural Archetypes
Every structure has an underlying organising principle. Yuval Harari’s great book ‘Sapiens: A Brief History of Humankind’ helped us comprehend that as a species, we are constantly looking for an organising principle around which to cluster.
Our climb to supremacy on this fragile planet is largely due to our capacity to rally vast numbers of people around an appealing notion, such as membership in a tribe, area, political party, or sports club.
It provides humans an enormous advantage over other animals. Millions of individuals follow the Dongote Group of Companies, despite the fact that the majority do not work for the company.
Organising concepts are powerful catalysts, and they are also active in our professional lives. So, the fourth principle of structural design is to align your structure’s organising principle with the needs of your strategy.
Structure, Strategy, and Organisation
Structure is the design of the organisation through which strategy is implemented. Changes in an organization’s strategy might cause new administrative issues, necessitating the creation of a new structure to ensure the successful implementation of the new plan.
The structural architecture of an organisation outlines its roles, duties, and lines of reporting, and it can have a significant impact on the sources of its competitive advantage.
Thus, failing to properly modify structures can completely weaken implementation. Chandler (1962) demonstrated how organisations evolved over time by identifying four consecutive stages:
Acquisition of resources, such as employees and raw materials, and the establishment of marketing and distribution networks
Establishing functional structures to boost efficiency.
Adoption of growth and diversification strategy: diversification into new markets and products to overcome limitations of the home market.
The development of the then-revolutionary diversionalized structure for managing massive companies.
It is worth noting that Chandler felt that strategy is provided, therefore even before developing a structure, a plan is in the back of one’s mind. That is why, after developing functional structures, strategists embrace the already established -existing- strategy (Mintzberg, 1987).
The Relationship Between Strategy and Structure
Structure is more than just an organisation chart. Structure refers to the people, positions, procedures, processes, culture, technology, and other aspects that make up the organisation. It defines how all of the bits, parts, and processes interact (or do not, in some circumstances).
This structure must be completely interwoven with strategy if the organisation is to achieve its mission and goals. Structure helps strategy. When an organisation changes its strategy, its structure must adapt to support the new plan. When it doesn’t, the structure works as a bungee cord, pulling the organisation back to its previous plan.
What the organisation does defines its strategy. Changing strategy entails changing everything everyone in the organisation does (Ansoff, 1965). Chandler’s (1962) statement ‘Structure follows strategy’ implies that every organisational structure is primarily developed based on the organization’s strategy.
Therefore, successful implementation of an organization’s strategy depends on the firm’s primary organisational structure. This is because the organisational structure determines the firm’s primary activities and how they will be integrated to achieve the firm’s strategic goal.
The core structure of an organisation is one of the fundamental mechanisms by which strategists position the firm to carry out the strategy in a way that balances internal efficiency and effectiveness (Grant, 1998). Because structure follows strategy, selecting an organisational structure is heavily influenced by the firm’s strategy.
The structural design connects essential activities and resources of the organisation, thus it must be closely matched with the demands of the firm’s strategy.
This is because organisations change their growth strategy in reaction to environmental changes, but the new approach usually causes administrative issues that lead to a decrease in performance.
The issues arise because the current organisation is poor at organising and coordinating the operations required under the new strategy. To resolve the difficulties and improve performance, the structures are therefore re-designed according to the criteria of the strategy.
This implies that failure to redesign the structure would eventually result in a decline in performance (Ansoff, 1965). For example, depending on the basic organisational structure, developing new product features may necessitate more collaborative work between different departments as well as with suppliers and distributors.
This shift in behaviour could be aided by lowering departmental targets and establishing a cross-departmental development budget, resulting in a structural redesign. Similarly, if a firm’s fundamental organisational structure remains unchanged and a new strategy is required, it may be necessary to adopt a new structure.
Consider a company that starts as a simple functional unit functioning at a single location, such as a shoe warehouse, and in a single industry. The firm’s initial growth strategy is volume expansion, which necessitates the establishment of an administrative office to manage the additional volume.
The growth strategy evolves into geographic expansion, necessitating the establishment of various field units that execute the same role but in different areas. Administrative challenges such as standardisation, specialisation, and inter-unit coordination will necessitate geographic units and a central administrative unit to supervise these issues.
If the firm continues to pursue its product diversification strategy, it must change its structure and adopt a multidivisional structure in which similar activities are grouped and separate divisions handle independent products and are responsible for short-run operating decisions.
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