Page 218 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Strategic Management

Notes Managing the Complexity of Strategic Change

Quinn suggests that strategic change may need to proceed incrementally, i.e. in small stages. He
called the process “logical incrementalism”. The clear implication is that it may not be possible
to define the final organisation structure, which may also need to evolve as the strategy moves
forward incrementally. He recognizes the importance of informal organisation structures in
achieving agreement to strategy shifts. If the argument is correct, it will be evident that any idea
of a single, final organisation structure – after deciding on a defined strategy – is dubious.

Criticism of the Strategy – First, Structure- Afterwards Process

1. Structures may be too rigid, hierarchical and bureaucratic to cope with the newer social
values and rapidly changing environment.
2. The type of structure is just as important as the business area in developing the
organisation’s strategy. It is the structure that will restrict, guide and form the strategy.

3. Value chain configurations that favour cost cutting or, alternatively, new market
opportunities may also alter the organisation required.
4. The complexity of strategic change needs to be managed, implying that more complex
organisational considerations will be involved. Simple configurations such as a move
from a functional to a divisional structure are only a starting point in the process.

5. The role of top and middle management in the formulation of strategy may also need to
be reassessed: Chandler’s view that strategy is decided by the top leadership alone has
been challenged. Particularly for new, innovative strategies, middle management and the
organisation’s culture and structure may be important. The work of the leader in
empowering middle management may require a new approach – the organic style of
leadership.

The Concept of ‘Strategic Fit’

Although it may not be possible to define which comes first, there is a need to ensure that
strategy and structure are consistent with each other. For example, Pepsi Co reorganised its
North American business to ensure that its strengths in the growing non-carbonated drinks
market could be exploited across its full range of drinks. For an organisation to be economically
effective, there needs to be a matching process between the organisation’s strategy and its
structure. This is the concept of strategic fit.
In essence, organisations need to adopt an internally consistent set of practices in order to
undertake the proposed strategy effectively. It should be said that such practices will involve
more than the organisation’s structure. They will also cover such areas as reward systems,
information systems and processes, culture, leadership styles, etc.

There is strong empirical evidence, both from Chandler and Senge, that there does need to be a
degree of strategic fit between the strategy and the organisation structure.
Although the environment is changing all the time, organisations may only change slowly and
not keep pace with external change, which can often be much faster – for example,
the introduction of digital technology. It follows that it is unlikely that there will be a perfect
fit between the organisation’s strategy and its structure. There is some evidence that a
minimal degree of fit is needed for an organisation to survive. It has also been suggested that, if
the fit is ensured early during the strategic development process, then higher economic
performance may result. However, as the environment changes, the strategic fit will also need
to change.

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