My answer to How is it that there is a strong link between a company's strategy and its structure?
Answer by Ken Larson:
Image: “Small Business Trends”
“Don’t Let Your Structure Curse Your Business”
“WASHINGTON TECHNOLOGY” By Bob Davis
“A company’s structure, the way that it is internally organized, can be a good or bad thing.
On the plus side, structure in a company provides a sense of stability. On the negative side, structure can stifle creativity and productivity.
It also can engender silo thinking because it causes employees to consider change and new business opportunities through the lens of the silo they work in.
Often structure rationalizes fiefdoms within a company whether they are responsive to management’s needs or not. Additionally, culture is a key construct of all organizations. Structure underpins and perpetuates a company’s culture. It engenders a company’s culture for good or bad.
Another layer of complexity that embeds structure within a company is budgets. Unfortunately, in our industry, budgets do not serve as managerial guides; they rule!
The clear majority of existing company structures were created and driven by the company’s early successes. In other words, company’s structures have grown organically since Day 1 of operations.
If your company was newly created today, would it have the same structure? I argue probably not. Since the company’s services, expertise, customers, employees by-and-large, and market segments have changed since the start of operations. A new structure would better respond to current market conditions.
Structure is not forward looking. It evolved based upon the company’s history. It does not enable a company to quickly adapt to new opportunities or threats. Over the years, we have read about companies that pursued the last penny of revenue without changing their company’s rigid structure while they steadily went out of business.
With ever changing customer priorities, technology preferences, and competition, companies must become adaptive; they must be able to respond to their target market(s) as it evolves and not as they perceived it to be from an outdated perspective. Taking three years, give or take, to respond to new market conditions is too long.
The company’s structure should facilitate the execution of strategy and not be a deterrent to the execution of stated strategy.
New strategy equals new structure.
This requirement is because changes in strategy require changes in structure e.g. new budget outlays in terms of how resources will be allocated to ensure successful execution of the new strategy. Structure should follow strategy not vice versa.
As mentioned previously, structure engenders a company’s culture – good or bad. This is the main reason why culture is virtually impossible to change. When a company maintains the same structure and budget schema, year-end-and-year-out, employees may not see the need for change that seems obvious to senior management.
Who owns a company’s structure? In other words, who is responsible for ensuring that the company’s structure is effective today i.e. contributes to achieving growth goals? Who assesses whether the existing structure will enable strategic execution and is responsive to current business conditions? The company’s board of directors/advisors and top management own the company’s structure.
And there is another piece.
Someone, trusted by top management, must be able to perform strategic thinking as in strategic marketing thinking to be able to envision and reconcile the company’s capabilities, assets, resources, infrastructure, and culture with its evolving, external market environment.
If the company does not possess this skill, then a marketing communications firm with management consulting expertise could be engaged. Otherwise you’re just reshuffling the deck with the same cards.”
About the Author
Bob Davis has over 35-years’ experience in the federal information technology industry. He has held senior positions with products- and services-oriented, high-tech IT companies during his career. Bob has successfully worked for large- and medium–sized companies, and small businesses. Leadership positions have been held in business development, marketing, and program management. Bob has a doctor of management from the University of Maryland University College. He works for a medium-size company in our industry.