For FaisalMover interview

The historian Alfred Chandler of Harvard Business School wrote a seminal book published in
1977 on the history of strategic decision making at the highest levels of Corporate America ,
including DuPont, General Motors, Standard Oil and Sears Roebuck. The book was called
The Visible Hand: The Managerial Revolution in American Business.
In this work Chandler
proclaimed a maxim for the ages that has been followed as doctrine by strategists and
consultants alike ever since. The maxim:

Structure follows Strategy.

That is to say, all aspects of an organizations structure, from the creation of divisions and
departments to the designation of reporting relationships, should be made while keeping the
organizations strategic intent in mind.

Strategy, of course, lines up the arenas and markets in which a company will compete,
proclaims a targeted customer base, and asserts the matters by which the company will
seek to differentiate itself. Chandler described how the successful progress of
mid-twentieth century General Motors can be attributed to the strategic foresight of Alfred
P. Sloan, who laid out the famous divisions of GM: Chevrolet, Pontiac, Oldsmobile Buick,
Cadillac listed here in order of pricing segment and lined up with market segments so
that each division could seek to please an intended customer segment.

This is structure following strategy. Chandler showed that the need to reorganize or to
restructure is triggered by a strategic shift driven by new technologies or market
changes.

The way that you organize your company or organization to optimize the pursuit of strategic
objectives is an important part of organizational design. Other design elements, such as
hiring and personnel development practices, communication and decision-making systems,
reward, recognition and renewal systems, all must be aligned around the chosen structure,
but first you must decide upon the optimal structure for attaining your strategic objectives.

When considering a change in organizational structure, keep in mind the following criteria
for a good structure:

Aligns the organization to best follow strategic direction

Allows for clearly defined roles and responsibilities
Clarifies who makes what decisions.
Enables clear accountability.
 Minimizes handoffs that affect the customer experience. Minimizes the customer
runaround.
Minimizes handoffs that create confusion over who is responsible for what
outcomes.
Pulls together the people who most need to work closely with each other.
Allows information to flow unrestricted to those who need it.
Creates manageable spans of control.
Is augmented by informal channels of cross boundary communication.

Generally, there are five ways to structure a company or corporation: Organize by

Function, Product, Customer Segment, Business Process, or Matrix. Here are the pros and
cons of each:

Functional Structure (e.g. Operations, HR, Finance, Marketing Departments):

Pro:

People with a common profession work together so standards of performance are

well understood
People in a unit talk the same language
Easy to maintain stability

Con:

Conflicts arise between organizations/departments since priorities and objectives

often conflict
Decision making must be done at the top, where a cross-functional team sits
together at the same table

Organizing around Product Lines or Programs

Pro:

Strong identification with products

High degree of coordination between functions
Can allow rapid response to market changes affecting a class of product
Employees can see big picture and relate to a common outcome
Opportunity for employees to learn other functions
Decisions can be made closest to those working on product, more bottom-up
decision making
Con:

Can be lack of coordination between product lines

Functional or professional development can suffer as functional experts are
isolated from each other
Can be duplication of efforts across product groups. R&D can be parochial, only
focused on present clustering of products

Organizing around Customers or Market Segments

Pro:

Deeper understanding of customer needs.

High coordination among functions aimed at meeting customer needs.
More responsive to customers. Greater flexibility within business units for
purpose of adapting to needs of a particular customer segment.
Team members see the big picture.
Innovation is customer-driven.
Can be more satisfying for workers, as mission of customer focus is clear.
Opportunity to learn new functional skills.

Con:

Can be lack of coordination between business units.

Functional or professional development can suffer as functional experts are
isolated from each other.
Can be duplication of efforts across product groups. Team members cannot relate
to disparate customer segments.

Organizing as a Business Process (as championed by many experts on corporate

reengineering)

Pro:

Clarifies business outcomes at every stage of value delivery

Organizes people in such a way that problems do not fall between the cracks or
go unattended
Enables people with a common language across the organization, making it easier
to identify and reinforce accountability
Facilitates cross-functional understanding of the business
Con:

Can diminish focus on the customer unless customer-facing processes are truly
prioritized
Experts in functional areas such as Finance, HR, Marketing, etc. can be devalued
and unheeded
Can be duplication of efforts across process groups.

Organizing as a Matrix (e.g. customer segment groups crossed in matrix form by

functional, supporting departments.

Pro:

Simultaneous focus on external and internal business requirements. Can lead to

more integrated, holistic decision-making.
Employees can be reminded of the needs of the whole business enterprise.
Functional expertise can be directly and immediately applied to needs of program,
product or customer issues.

Con:

Can lead to diffusion of accountability.

Can be difficult to locate cause of organizational issues.
Can mean doing more with less people, and result in individual frustrations.
Can lead to confusion among customers who wish for a single point of contact.
Requires a very high level of competent lateral communication capability