A study involving over 200 senior managers demonstrates that overall firm performance is strongly influenced by how well a firm’s business strategy is matched to its organizational structure and the behavioral norms of its employees (Eric, Stanley and Tomas 2004). 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. This study looks at the relationship between organizational structure and strategy and how the former (organizational structure) is an instrument for implementation of the latter (strategy). 2.0 Introduction
Research on strategy and structure was initially triggered by Chandler's (1962) seminal work on the emergence of multidivisional structure in diversified firms such as Du Pont and General Motors. Chandler's basic argument is that structure follows strategy. Then Williamson (1975) provided a transaction cost analysis of the rationale underlying multiproduct firms' adoption of M-form structure. Almost in the meantime, Rumelt (1974) published his work on strategy, structure, and performance of diversified firms. Most of the criticisms toward the traditional strategy-structure research and Williamson's "M-form Hypothesis" came out in the 1980s (i.e., Hill & Pickering, 1986; Hill and Hoskisson, 1987; Hill 1988, Hoskisson, 1987, Palmer et al. 1987; Sanchez-Bueno & Suarez-Gonzalez, 2010). In these theoretical and empirical studies, Charles W. L. Hill, Robert E. Hoskisson, Donald Palmer and their colleagues critically challenged the oversimplified arguments such as economic efficiency is the only driving force of multiproduct firms' adoption of M-form structure and M-form is almost unconditionally superior to other administrative structures. In the 1990s, research on strategy and structure was scattered over various areas and based on different disciplines. Palmer et al. (1993) extended their original work to a more comprehensive study of the institutional, political, and economic accounts of late adoption of the multidivisional form by large U.S. corporations. More recently, Liebeskind (2000) provided a systematic analysis of the benefits, costs, and organizational arrangements of internal capital markets. For too long, structure has been viewed as something separate from strategy. 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 and strategy are dependent on each other. You can create the most efficient, team oriented, synergistic structure possible and still end up in the same place you are or worse if there is no strategy to implement. 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 integrated with strategy for the organization to achieve its mission and goals. Structure...
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