Strategy Follows Structure, Structure Supports Strategy
For too long, structure has been viewed as something separate from strategy. Structure is how the entire organization operates, not just its organization chart. Revising structures are often seen as ways to improve efficiency, promote teamwork, create synergy or reduce cost. Yes, restructuring can do all that and more. What has been less obvious is that structure directly impacts how well or poorly a firm executes its strategies. Literally, structure affects sales, growth, profits and ROI. Strategy and structure are dependent on each other. You can’t have one without the other.
You can create the most efficient, team oriented, synergistic structure possible and still end up in the same place you are or worse. That’s because the alignment of strategy and structure determines how well an organization executes its strategy which, of course, affects the end results it produces. Strategic alignment may not be a hot buzz word yet it is actually the foundation concept that makes everything else work. Having a great culture, great leaders, engaged employees and effective teams can only produce results when they are fully aligned with strategy. Having a brilliant strategy doesn’t mean a thing if the structure can’t implement it.
The Connection between Strategy and Structure
Structure is not simply an organization chart. Structure is all the people, positions, procedures, processes, culture, technology and related elements that comprise the organization. It defines how all the pieces, parts and processes work together (or don’t in some cases). This structure must be totally aligned with strategy for the organization to achieve its mission and goals. Structure supports strategy.
If an organization changes its strategy, it must change its structure to support the new strategy. When it doesn’t, the structure acts like a bungee cord and pulls the organization back to its old strategy. Structure supports strategy. What the organization does defines the strategy. Changing strategy means changing what everyone in the organization does.
When an organization changes its structure and not its strategy, the strategy will change to fit the new structure. Strategy follows structure. Suddenly management realizes the organization’s strategy has shifted in an undesirable way. It appears to have done it on its own. In reality, an organization’s structure is a powerful force. You can’t direct it to do something for any length of time unless the structure is capable of supporting that strategy.
A Science Fiction and Real World Examples
Let’s look at an imaginary example using the human body. Suppose science figured out how to create a living tissue arm to replace one’s existing arm that could perform 300% better in strength, responsiveness and dexterity. The strategy here is to restructure the body with this super arm so it can do more. The scientists successfully replace an existing arm with this new super arm.
What will happen? The rest of the body remains as it was before. So the heart, circulation system, nervous system and brain are still structured to support a regular arm. This new arm requires more and faster blood flow, faster neuron responses in the brain and so on to support its functions. Over time, the super arm will evolve back into a regular arm because the rest of the body cannot support its enhanced capabilities. For this science fiction example to work, scientist would need to restructure the entire human body, not just one part of it.
What happens when you restructure sales channels resulting in large sales increases but nothing is changed in order processing, customer support, engineering or manufacturing? You end up with a lot of unhappy customers because the company can’t deliver on its promise. How many times have we seen something like this happen?
Or what happens when you add a new offering that goes to a new target customer? Maybe a company has a sales force that sells to small businesses and lower management in larger organizations. They add a new offering that is targeted at top executives. The existing sales force / sales channels cannot effectively sell to that new target. This has happened just a few too many times.
And, of course, what happens when a firm makes a major push to upgrade its quality and service without improving everything in the organization that supports its products and service? Disaster. Plain and simple.
Strategy is the Structure
The sum total of how an organization goes about its work is its strategy. Structure and strategy are married to each other. When a company makes major changes, it must carefully think out every aspect of the structure required to support the strategy. That is the only way to implement lasting improvements. Every part of an organization, every person working for that organization needs to be focused on supporting the vision and direction. How everything is done and everything operates needs to be integrated so all the effort and resources support the strategy.
It takes the right structure for a strategy to succeed. Management that is solely focused on results can have a tendency to direct everyone on what they need to do without paying attention to the current way the organization works. While people may carry out these actions individually, it is only when their daily way of working is integrated to support strategy that the organization’s direction is sustainable over time.
Implementing Change As Important As Strategy Itself
During the last 30 years, we’ve worked with organizations in over 32 industries to help them find more ways to increase sales, growth rates and market share. Improving existing strategies and creating new strategies has been one of our contributions to these clients. But, over the years, we began to notice that some clients were not successful in implementing new strategies. That is what led us to look deeper into the cause behind this.
Does your company’s DNA structure support your strategy?
Top management can’t just send out a proclamation about a new strategy, direction and vision and expect everyone to follow it. To implement such a strategic shift requires a complete change within the organization itself. The organization’s DNA has to be rebuilt or its existing DNA structure will cause the new strategy to fail and revert back to the old strategy. And that will happen without top management’s involvement.
Leadership and people issues turn out to be much more important than we may have realized. On the surface, everyone talks about the importance of people and leadership but too often, management puts this on the back burner when the heats on to deliver quarterly results or meet the guidance. Structure is strategy.
That’s why we realized our focus on increasing our client’s revenue had to be balanced by an equal focus on implementing change. We didn’t want to leave clients with reports that weren’t implemented or worse implemented through directives that ultimately failed. So many years ago we became project managers for our client’s implementation efforts to insure that their new strategies designed to increase revenue actually rang the cash register. You can’t improve strategy, increase revenue, even enhance the performance of a sales force without addressing the structural, people, cultural, communication, measurement and leadership aspects of the organization or at least that part of the organization you are changing.
Strategy and structure are married to each other. A decision to change one requires an all out effort to change the other. But that structural change must be well thought out and based on a thorough cause and effect analysis. You don’t just change a structure to change it. You have to make sure the changes will support that strategy. At the same time, you don’t just implement a better leadership and engagement approach in a company or alter the organizational chart without evaluating how that is going to effect the firms ability to carry out its current strategies.
Don Shapiro is the President and Founder of First Concepts Consultants, Inc, advisers to senior management on strategy, structure, leadership, alignment, employee engagement, change, customer value and sales. He inspires audiences with his energetic, fun and interactive speeches and seminars about his discoveries. Don is a co-author of “”The Character-Based Leader” and is currently writing a new book “Lead with Trust.
This article is by Don Shapiro from firstconcepts.com.