Lesson 1, Topic 1
In Progress

5.5 Matching structure with strategy Copy

Nik Shazana November 1, 2022

Changes in strategy often require changes in the way an organization is structured for two major reasons. First, structure largely dictates how objectives and policies will be established. For example, objectives and policies established under a geographic organizational structure are couched in geographic terms. Objectives and policies are stated largely in terms of products in an organization whose structure is based on product groups. The structural format for developing objectives and policies can significantly impact all other strategy-implementation activities.

The second major reason why changes in strategy often require changes in structure is that structure dictates how resources will be allocated. If an organization’s structure is based on customer groups, then resources will be allocated in that manner. Similarly, if an organization’s structure is set up along functional business lines, then resources are allocated by functional areas. Unless new or revised strategies place emphasis in the same areas as old strategies, structural reorientation commonly becomes a part of strategy implementation. Changes in strategy lead to changes in organizational structure. Structure should be designed to facilitate the strategic pursuit of a firm and, therefore, follow strategy.

General Framework for Strategy Implementation

The first step in implementation is identifying the activities, decisions, and relationships critical to accomplishing the activities. There are six principal administrative tasks that shape a manager’s action agenda for implementing strategy. The specific components of each of the six strategy implementation tasks:

Building an Organization Capable of Executing the Strategy

The organization must have the structure necessary to turn the strategy into reality. Furthermore, the firm’s personnel must possess the skill needed to execute the strategy successfully. Related to this is the need to assign the responsibility for accomplishing key implementation tasks to the right individuals or groups.

Establishing a Strategy-Supportive Budget

If the firm is to accomplish strategic objectives, top management must provide the people, equipment, facilities, and other resources to carry out its part of the strategic plan. Further, once the strategy has been decided on, the key tasks to perform and kinds of decision required must be identified, formal plans must also be developed. The tasks should be arranged in a sequence comprising a plan of action within targets to be achieved.

Installing Internal Administrative Support Systems 

Internal systems are policies and procedures to establish desired types of behaviour, information systems to provide strategy-critical information on a timely basis, and whatever inventory, materials management, customer service, cost accounting, and other administrative systems are needed to give the organization important strategy executing capability. These internal systems must support the management process, the way the managers in an organization work together, as well as monitor strategic progress.

Devising Rewards and Incentives that are tightly linked to Objectives and Strategy

People and departments of the firm must be influenced, through incentives, constraints, control, standards and rewards to accomplish the strategy.

Building a Strategy-Supportive Corporate Culture

Corporate culture refers to a company’s values, beliefs, business principles, traditions, ways of operating, and internal work environment. The bedrock of Wal-Mart’s culture, for example, is dedication to customer satisfaction, zealous pursuit of low costs, and a strong work ethic. Every company has a unique organizational culture. Each has its own business philosophy and principles, its own ways of approaching problems and making decisions, its own work climate, its own embedded patterns of “how we do things around here,” and its own taboos and political don’ts in other words, its own ingrained beliefs, behaviours and thought patterns, business practices, and personality that define its corporate culture.

Where Does Corporate Culture Come From?

An organization’s culture is bred from a complex combination of socio-logical forces operating within its boundaries. A company’s culture is manifested in the values and business principles that management preaches and practices, in its ethical standards and official policies, in its stakeholder relationships in the traditions the organization maintains, in its supervisory practices, in employees’ attitudes and behaviours, in the legends people repeat about happenings in the organization, in the peer pressures that exist, in the organization’s politics. Company’s culture can originate anywhere: from one influential individual, work group, department, or division, from the bottom of the organizational hierarchy or the top.

How culture can promote better strategy execution

Strong cultures promote good strategy execution when there’s fit and hurt execution when there’s little fit. A culture grounded in values, practices, and behavioural norms that match what is needed for good strategy execution helps energize people throughout the company to do their jobs in a strategy-supportive manner, adding significantly to the power and effectiveness of strategy execution. For example, a culture where frugality/economy/stinginess and thrift/saving/caution are values strongly shared by organizational members is very conducive to successful execution of a low cost leadership strategy.

A culture where creativity, embracing change, and challenging the status quo are pervasive themes is very conducive to successful execution of a product innovation and technological leadership strategy. A culture built around such business principles as listening to customers, encouraging employees to take pride in their work, and giving employees a high degree of decision-making responsibility is very conducive to successful execution of a strategy of delivering superior customer service. A tight culture-strategy alignment acts in two ways to channel behaviour and influence employees to do their jobs in a strategy-supportive fashion.

A work environment where the culture matches the conditions for good strategy execution provides a system of informal rules and peer pressure regarding how to conduct business internally and how to go about doing one’s job. Strategy-supportive cultures shape the mood, temperament, and motivation the workforce, positively affecting organizational energy, work habits and operating practices, the degree to which organizational units cooperate, and how customers are treated.

strong strategy-supportive culture nurtures and motivates people to do their jobs in ways conducive to effective strategy execution; it provides structure, standards, and a value system in which to operate; and it promotes strong employee identification with the company’s vision, performance targets, and strategy. All this makes employees feel genuinely better about their jobs and work environment and the merits of what the company is trying to accomplish. Employees are stimulated to take on the challenge of realizing the company’s vision, do their jobs competently and with enthusiasm, and collaborate with others as needed to bring the strategy to fruition.

The risks of Strategy-Culture Conflict

When a company’s culture is out of sync with what is needed for strategic success, the culture has to be changed as rapidly as can be managed – this, of course, presumes that it is one or more aspects of the culture that are out of whack rather than the strategy. While correcting a strategy-culture conflict can occasionally mean revamping strategy to produce cultural fit, more usually it means revamping the mismatched cultural features to produce strategy fit. The more entrenched the mismatched aspects of the culture, the greater the difficulty of implementing new or different strategies until better strategy-culture alignment emerges. A sizable and prolonged strategy-culture conflict weakens and may even defeat managerial efforts to make the strategy work.

Changing a Problem Culture

Changing a company’s culture to align it with strategy is among the toughestmanagement tasks easier to talk about than do. Changing problem cultures is very difficult because of the heavy anchor of deeply held values and habits-people cling emotionally to the old and familiar. It takes concerted management action over a period of time to replace an unhealthy culture with a healthy culture or to root out certain unwanted cultural obstacles and instil ones that are more strategy supportive.

The first step is to diagnose which facets of the present culture are strategy supportive and which are not. Then, managers have to talk openly and forthrightly or directlyto all concerned about those aspects of the culture that have to be changed. The talk has to be followed swiftly by visible, aggressive actions to modify the culture-actions that everyone will understand are intended to establish a new culture more in tune with the strategy.

The menu of culture-changing actions includes revising policies and procedures in ways that will help drive cultural change, altering incentive compensation visibly praising and recognizing people who display the new cultural traits, recruiting and hiringnew managers and employees who have the desired cultural values and can serve as role models for the desired cultural behaviour, replacing key executives who are strongly associated with the old culture, and taking every opportunity to communicate to employees the basis for cultural change and its benefits to all concerned.

Leadership and Strategic Implementation

A strategy manager has many different leadership roles to play such as play: visionary, chief entrepreneur and strategist,chief administrator, culture builder, resource acquirer and allocator, capabilities builder, process integrator, crisis solver, spokesperson, negotiator, motivator, arbitrator, policy maker, policy enforcer, and head cheerleader. Sometimes it is useful to be authoritarian and hardnosed/rigid; sometimes it is best to be a perceptive listener and a compromising decision maker; sometimes a strongly participative, collegial approach works best; and sometimes being a coach and adviser is the proper role. Many occasions call for a highly visible role and extensive time commitments, while others entail a brief ceremonial performance with the details delegated to subordinates.

So developing appropriate leadership is one of the most important elements in the implementation of a strategy. This is important because the leaders are key organic elements who help an organization cope with changes. Appropriate leadership is necessary, though not a sufficient condition, for mobilizing people, and for developing effective structure and systems for the success of strategy.                                       

Failure of a leadership may lead to many difficulties or obstacles in achieving goal congruence, communication breakdown, ambiguity with regard to roles of sub-units, and difficulty in obtaining commitment to a plan, e.g., staff conflicts and lack of strategic thinking. Leadership is the key factor for developing and maintaining the right culture and climate.

Self-Check Activity

Briefly explain how the structure can be matched with strategy.