Relationship between Business Strategy and Structure
Business Strategy primarily refers to the road-map laid out by an organization. The principal objective of strategy is to ensure that an organization achieves the set targets in order to sustain and grow in an increasingly competitive world. On the other hand, a structure is the manner in which the internal resources of a company get connected with each other. More specifically, structure is concerned with different groups that can be formed within an organization. For example, an organization having a functional structure will operate through the different functions such as Marketing, Finance, and Manufacturing.
Business Strategy is the main driver that decides the structure an organization. Also, in case the structure of a company is not synchronized with its strategy, then the company may not be able to achieve the set targets. For example, a company with a diversified product portfolio and has a functional structure (organized as per various functions such as Marketing, Finance and Operations) will not be able to compete effectively in each of the product categories. As a result, the company may start losing the market share of its products.
Evidently, structure plays a critical role in the accomplishment of an organization’s overall strategy. Another notable aspect is that both business strategy and organizational structure need to be continuously inter-linked in order to achieve desired results.
Correlation between Organizational Culture and Structure
Organizational structure is a formal system wherein employees, with well defined roles and responsibilities, communicate with other such members/employees for the achievement of common objectives. The structure of an organization is tangible and physical, which means that it is visible to internal as well as external stakeholders of a company. An organization’s structure is based on the overall strategy, which drives the policies and procedures of an organization. Consequently, the policies decide the behavior of managers and other associates within a company. An organization’s structure also helps in understanding the existing hierarchical levels and Span of Control.
On the other hand, the culture of an organization is based on shared values, norms and individual group & behavior. More specifically, the culture of an organization is more informal in nature and is based on collective ideas & values shared by the employees. The ways in which various tasks are performed at different levels also defines the culture of an organization.
Structure and culture in organizations exist in close alignment. Structure is one of the determinants of culture; conversely, culture has been shown to have an influence on the organizational structure and operational systems in an organization. Both are mechanisms for the coordination of organizations: structure as an integrating mechanism for organizational activities, and culture as an integrating mechanism concerned with behavior and values within organizations.
Organizations and individuals need an understanding of these mechanisms in order to manage uncertainty in the face of ever-changing markets and business conditions. An effective alignment of structure and culture provides a means of getting people to work together to reach strategic goals and achieve an organization’s vision. Together they provide a focus to enable organizations and individuals to reduce uncertainty, variability and ambiguity, so providing a framework for acting in a consistent manner. Structure and culture have overlapping functions; however one mechanism is not necessarily a substitute for the other.
While structure helps an organization in defining objectives, the culture helps in achieving those objectives in viable manner. Therefore, culture is also critical in the achievement of the defined objectives. More specifically, culture is a function of behavior and relationships patterns.
- How Strategy Shapes Structure (Harvard Business Review)