The relationship between strategy and structure - u6 s2p9

Structure
- tells you who has what authority
- tells you the limits of that authority
- tells you who reports to whom
- tells you who holds which resources
- tells you what career paths are available
- tells you how knowledge flows within the organisation (whittington 2003)

and

- can be expressed in an organisational chart (formal structure)
- cannot always be expressed in an organisational chart (informal structure)

- provides ways for an organisation to coordinate its activities and deliver a unique mix of value (porter 1996)

But, does structure follow strategy (chandler 1962)? Or does strategy follow structure?

Structure is one of the levers of strategic implementation. Mintzberg provides models to show how different structures fit different strategies. eg the two different strucutres at Novotel prior to 1992 and after the mid 90's reorganisation. Structure can be difficult to change, and one organisation can have a number of structures within it, so maybe it's not as clear cut as Mintzberg's model implies. Not all strategy is deliberate (Mintzberg & Waters) so it could be argued that the structure influences strategy. In a dynamic business environment, change is inevitable and recurrent. Adaptable structures exist because of the need to adapt strategy on an ongoing basis. It could be argued that an adaptable strcuture needs to be in place before new adaptable strategies can be implemented.

Structure follows strategy:
For example, if an organisation follows a cost leadership strategy, then its products must be produced reliably and cost effectively, necessitating a structure that facilitates coordination and minimises product design, supply, operations and distribution (see value chain).

Thinking about non-profits, the same is true of a non-profit voluntary organisation with a strong sense of mission (eg people's supermarket). If it aims to maximise public donations and credibility, its structure must minimise admin costs and provide flexibility.

These examples agree with Chandler's assertion, however it assumes that the management of the strategy/structure relationship is a rational process undertaken only by senior management.

However contingency theory implies a cause-and-effect relationship between eg the dynamic environment and the design of organisational structure. In this situation, it could be said that it is the environment that drives structural change.

In the Agilent example (u5 p11-12) strategic change drove a need for structural change at the wider level. However lower down the organisation change was needed and structural change and strategic change went hand-in-hand.

At $EMPLOYER, one could consider that currently structure restricts strategy. The wider organisational structure and structure in departments is quite rigid.

Contingency theory can consider contingencies too much in isolation, however. Employees are more likely to contribute positively if they work within an appropriate structure.

Mintzberg and Miller argue that the relationship between structure and strategy is more 'emergent' in nature.

Mintzberg (1990) said "Structure follows strategy as the left foot follows the right".