Question

A continuing debate amongst scholars and practitioners is if “structure follows strategy” or “strategy follows structure.” Read Hall and Saias’ Strategy Follows Structure!. Then, select one of the schools of thought and explain why you believe it to be the best approach.

Answer 1

We select Strategy Follows Structure

Let us begin by defining strategy and structure. Strategy is the direction and scope of an organization which helps it achieve competitive advantage for the organization over the long term. Strategy meets the needs of markets and fulfils stakeholder expectations by configuring its resources given the myriad of constraints internal and external to an organisation. Mintzberg (1987), says “Structure is a fundamental, tangible or intangible notion referring to the recognition, observation, nature, and permanence of patterns and relationships of entities”.

Chandler (1962) concluded that 'structure follows strategy’, however today many researchers believe there has been considerable change since it was postulated and environment today is more competitive, and prone to frequent changes. This new era of high environmental uncertainty and rapid development in the backdrop of globalisation renders the above argument to be less relevant as it was much before when environmental uncertainty was lower and stable.

One would agree structure must be totally integrated with strategy for the organisation to achieve its goals, on the other hand one cannot deny structure is a powerful force within an organisation. Leadership and people issues turn out to be much more important especially in manufacturing or design environment. Structure, thus cannot be directed to achieve organisation goals for any length of time and as Mulcaster points out structure will act like a bungee cord and pull the organization back to its old strategy.

Compelling strategies have been ignored because it did not fit the then prevailing structure of the organization and only the changes which were adopted within the existing structure were able to move ahead. Any organisation’s strategic options are bounded by the internal or external environment. While the competitive environment propels the organization to set goals based on differentiation and/or cost, the internal structural environment directs it to develop incremental innovations can help achieve those goals without rocking the entire boat. In other words, strategy follows structure.