Page 217 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Unit 11: Structural Implementation

11.7 Structures for Strategies Notes

To understand the logic behind this approach to the development of organisational structures,
it is helpful to look at the historical background. As already mentioned, prior to the early 1960s,
the US strategist Alfred Chandler studied how some leading US corporations had developed
their strategies in the first half of the twentieth century. He then drew some major conclusions
from this empirical evidence, the foremost one being that the organisation first needed to
develop its strategy and, after this, to devise the organisation structure that delivered that
strategy. Chandler drew a clear distinction between devising a strategy and implementing it.
He defined strategy as:
“The determination of the basic long-term goals and objective of an enterprise, and the adoption
of courses of action and the allocation of resources necessary for carrying out these goals”.

The task of developing the strategy took place at the corporate and business levels of the
organisation. The job of implementing it then fell to the various functional areas. Chandler’s
research suggested that, once a strategy had been developed, it was necessary to consider the
structure needed to carry it out. A new strategy might require extra resources, or new personnel
or equipment which would alter the work of the enterprise.
Changes in Business Environment and Social Values

Table 11.2
Early twentieth century Early twenty- first century
Uneducated workers, typically just moved Better educated, computer- literate,
from agricultural work into the cities skilled
Knowledge of simple engineering and Complex, computer-driven, large-scale
technology Multifaceted and complex nature of
The new science of management recognized management now partially understood
simple cause-and-effect relationship Mix of some mature, cyclical markets
Growing, newly industrializing markets and some high-growth, new-
and suppliers technology markets and suppliers
Sharp distinctions between management Greater overlap between management
and workers and workers in some industrialized
countries

To understand why it is no longer appropriate to develop an organisation structure after deciding
a strategy, the earlier theory needs to be placed in its historic strategic context. Since Chandler’s
research in the early twentieth century, the environment has changed substantially. The workplace
itself, the relationship between workers and managers, and the skills of employees have all
altered substantially. Old organisational structures embedded in past understandings may
therefore be suspect. Table 11.2 summarizes how the environment has changed from the early
twentieth century to early twenty-first century.

Strategy and Structure are Interlinked

According to modern strategists, strategy and structure are interlinked. It may not be optimal
for an organisation to develop its structure after it has developed its strategy. The relationship
is more complex in two respects:
1. Strategy and the structure associated with it may need to develop at the same time in an experimental
way : As the strategy develops, so does the structure. The organisation learns to adapt to its
changing environment and to its changing resources, especially if such change is radical.

2. If the strategy process is emergent, then learning and experimentation involved may need a more
open and less formal organisation structure.

LOVELY PROFESSIONAL UNIVERSITY 211