Strategy Structure relationship

 As per Wright, Knoll and Parnell ‘ Organizational

structure refers to the ways that tasks and responsibilities
are allocated to individuals and the ways that individuals are
grouped together into offices, departments and divisions.
 A suitable organization structure is essential to implement
strategies and achieve stated goals.
 To be effective, the basic structure is governed by a set of
rules and regulations, reward-punishment systems,
information networks, control procedures etc.
 Checklist for determining appropriateness
of organizational structure
 Is the structure compatible with the corporate strategy?
 At the corporate level, is the structure compatible with the
outputs of the firm’s business units?
 Are there too many or too few hierarchical levels at either
the corporate or business unit level of analysis?
 Does the structure promote coordination among its parts?
 Does the structure allow for appropriate centralization or
decentralization of authority?
 Does the structure permit the appropriate grouping of
activities?
 five sequence procedure for fitting
structure to strategy:
 Pinpoint the key functions and tasks necessary for successful
strategy execution.
 Reflect on how strategy critical functions and organizational units
relate to those that are routine and to those that provide staff
support.
 Make strategy critical business units and functions the main
organizational building blocks.
 Determine the degrees of authority needed to manage each
organizational unit bearing in mind both the benefits and costs of
decentralized decision making.
 Provide for coordination among the various organizational units.
 Functional Structure
 The functional organizational concept, originated with
Fredrick W. Taylor and it permits a specialist in a given area
to enforce his directive within the clearly defined scope of his
authority.
•A functional manager can make decisions and issue
orders to the persons in divisions other than his own, with
a right to enforce his advice. Some good examples of
specialists who have been given functional authority in
some organizations are in the areas of quality control,
safety and labor relations.

The functional organization features separate hierarchies

for each function creating a larger scale version of
functional departments. Functional departmentalization is
the basis for grouping together jobs that relate to a single
organizational function or specialized skill such as
marketing, finance, production, and so on. The chain of
command in each function leads to a functional head who
in turn reports to the top manager.
 The functional design enhances operational efficiency
as well as improvement in the quality of the
product because of specialists being involved in each
functional area and also because resources are allocated by
function rather than being duplicated or diffused throughout
the organization .
 One of the main disadvantages of the functional design is
that it encourages narrow specialization rather than
general management skills so that the functional
managers are not well prepared for top executive positions.
Also, functional units may be so concerned with their own
areas that they may be less responsive to overall
organizational needs.
 Functional Structure
Advantages Disadvantages
 Clarity
 Effort focus
 Economies of scales
within the function  Poor decision making
 Specialization  Sub Unit Conflicts
 Coordination within the  Managerial Vacuum
team
 In-depth skill
development
 Suitability: Best for
small and medium scale
organization.
Divisionalisation : Product Departmentation/
Geographic Divisionalization
 Product Departmentation organizes employees based on which product
line or set of services they work with. Each product line has a
department of its own, and each department has specialists in all of the
functions needed to produce and sell that product, such as marketing,
manufacturing, accounting and human resources.
 The departments in this type of company operate autonomously from
each other and are often better at responding to changing circumstances
in a flexible way. For example, the salespeople can talk to the design and
manufacturing specialists in their own department to address customer
satisfaction issues rather than having to go outside the department.
 Smaller businesses would use this type of structure only if they offer
distinctly different products or services. For instance, if a company
provides both copywriting and printing, it might make sense to operate
these services as separate and autonomous departments.
 Product Departmentation
Advantages
 It ensures better customer
service
 Unprofitable products may
be easily determined
 It assists in development of
all around managerial
talent
 Makes control effective
 It is flexible and new
product line can be added
easily.
Disadvantages
 It is expensive as duplication of
service functions occurs in
various product divisions.
 Customers and dealers have to
deal with different persons for
complaint and information of
different products.
 Due to low demand, resources
may not be fully utilized.
 Top level management has to face
difficulty to control production
division.
 Departmental managers and
supervisors may ignore overall
organizational objectives because
they focus only on their
department.
 It is very costly and not suitable
for small and medium sized firms
 Geographic Divisionalization sets up separate regional units,
each self sufficient in manufacturing, marketing etc. to cater
to the needs of local markets, As organizations grow, they
divide their activities among branches, regional offices or
other facilities from the main centre of their operations.
Strategic Business Unit (SBU)
The SBU structure is the
extension of the
divisional structure. In
its most extreme form,
the SBU operates as a
separate autonomous
organization and may
periodically send profits
to the corporate parent.
 Operates as company
within a company.
Strategic Business Unit (SBU) Structure
 Strategic Business Unit (SBU) is that business unit which has
all the required elements to be considered as complete
corporate business entity like vision & mission statements,
certain external market with proper products & customers
and management of that business unit can perform strategic
planning. When the organization expands to very large size,
then it is better for them to involve in Strategic Business
Unit Structure.
 Matrix
Structure
Since the matrix structure integrates
the efforts of functional and project
authority, the vertical and horizontal
lines of authority are combination of
the authority flows both down and
across.
It is also called grid organization or
project/product management. It requires
combining of functional and project or
product patterns of Departmentation in the
same organization structure.
Matrix Structure (College of Business Administration)

(Director)

(Dean) Employee
Advantages of Matrix Organization
1. Since there is both vertical and horizontal communication it
increases the coordination and this coordination leads to greater
and more effective control over operations.
2. Since the matrix organization is handling a number of projects,
available resources will be used fully.
3. It focuses the organizational resources on the specified projects,
thus enabling better planning and control.
4. It is highly flexible as regards adherence to rules, procedures
etc. Here experience is the best guide to establishing rules and
procedures.
5. As any department or division has to harness its effort towards
accomplishment of a single project, employees are effectively
motivated.
Disadvantages of Matrix Organization
1. Since, there is more than one supervisor for each worker, it
causes confusion and conflicts and reduce effective
control.
2. There is continuous communication both vertically as well
horizontally, which increases paper work and costs.
3. It is difficult to achieve a balance below on the projects
technical and administrative aspects.
 Project Structure
 This organizational structure are temporarily formed for
specific projects for a specific period of time, for the project
of achieving the goal of developing new product, the
specialists from different functional departments such as
production, engineering, quality control, marketing research
etc., will be drawn to work together. These specialists go
back to their respective duties as soon as the project is
completed.
 Really, the project organisation is set-up with the object of
overcoming the major weakness of the functional
organisation, such as absence of unity of command, delay in
decision-making, and lack of coordination.
Project Structure
When to use the project structure
 It is a one time task and is definable in terms of a single,
specific goal.
 It is large in scope
 It is unfamiliar or lacks precedent.
 It is complex and calls for high degree on independence.
 There is high stake in the successful completion of the
project.The outcome is very critical for the organization
 Advantages of Project Structure
 It is a remarkable illustration of relationship between
environment, strategy and structure.
 Team can focus properly.
 The grouping of activities on the basis of each project results
in introduction of new authority patterns.
 Since the specialists from different departments is drawn to
work together under the project organization it helps in
coordination.
 It makes for meaningful control and fixation of individual
responsibility.
Disadvantages of Project Structure
 The uncertainty may be attributed to the diverse
backgrounds of the professional who are deputed to
the project.
 The project manager finds it difficult to motivate and
control the staff in a traditional way in the absence of
well-defined areas of responsibility lines of communication
and criteria to judge performance.
 Delay in completion of the project may occur.
 Effective project management may also be hindered by the
top management who may not be wholly aware of the
problems at the project centre.
Factors influencing Organizational structure
 Size: Size is many times the driving factor for a company’s
organizational structure. Smaller or home-based businesses do not
usually have a vast structure because the business owner is usually
responsible for all tasks. Larger business organizations usually
require a more intense framework for their organizational
structure. Companies with more employees usually require more
managers for supervising these individuals. Highly specialized
business operations can also require a more formal organizational
structure.
 Business Environment: The external business environment can
also play an important part in a company’s organizational
structure. Dynamic environments with constantly changing
consumer desires or behavior is often more turbulent than stable
environments. Companies attempting to meet consumer demand
can struggle when creating an organizational structure in a
dynamic environment.
 More time and capital can also be spent in dynamic
environments attending to create and organizational
structure. This additional capital is usually a negative expense
for many small businesses.
 Technology: It is an important variable in the design of
organizational structure. To achieve satisfactory performance,
manager must design an organization with the proper mix of
technology, structure and human behaviour.
 People: A major influence on organizational structure is the
‘stock’ of personnel employed at the enterprise. The
attitudes, aspirations, experience and role of organization
members are also related to the structure of the organization.
 Managing resistance to change
People resist because they fear:
 Economic Loss
 Inconvenience
 Uncertainty
 Break in normal social life.
 Following guidelines can help to manage resistance to change:
 Inform: Communicate to those involved as far in advance as possible, the
reasons for the change and the associated benefits. People need to know
what is going to occur and why to dispel their fears.
 Plan: Plan proposed changes in detail and allow time for reflection. This
should include a consideration of repercussions including retraining,
relocation, the need for new procedures and policies.
 Minimize Damage: Protect those who will potentially be damaged by
the changes. Reduction in pay or job classification should not be
permitted.
 Reward: Reward those who go along with the change. Establish
retraining opportunities and make sure that more demanding position
receive higher pay.
 Timing: Make changes as gradually as conditions will permit. People
tolerate evolution more than they do revolution.
 Participation: Involve people in planning the changes where possible.
Those affected should be permitted to express their objections in
advance.