Who Says Structure Should Follow Strategy?
With Richard Tait
‘Structure follows strategy’ is one of those mantras trotted out every so often as a design principle for organisations.
I heard it again recently in a piece of work where the client was grappling with the implications of shifting to more digitally oriented service delivery strategy. In this kind of world, structures which support ‘analogue’ services are quite different or no longer required. This is partly because the technology takes care of things that people used to do manually, which means the people can be deployed onto tasks that add more value for the customer.
The mantra has become embedded in design doctrine partly because it’s hard to argue with its elegant simplicity and underlying wisdom. It makes sense to set up your shop with the benefit of knowing what you are planning to sell, to whom, where and how.
Plus the phrase is sort of catchy, if you are into that kind of thing.
It is true that organisational designs often have a use by date, particularly if they served a strategy whose time has passed. Alfred Chandler, who coined the phrase in the 1970s, was making the point that your arrangements for managing and doing the work need to adapt to reflect evolving direction and priorities.
No argument there. In fact, the need for organisations to adapt – to changing demands, changing environments, changing technologies - is a universal truth nowadays. The pace is accelerating and we are in the midst of a tech-enabled seismic shift, both in the way services are delivered and in the ‘back office’.
What if your strategy keeps changing?
But ‘structure follows strategy’ and its value in modern design practice could be questionable when it’s applied in an unthinking way. For example, it is unlikely that many organisations will rush off and completely re-tool their structures to reflect every new product, or topic, or customer type that their strategy decides is now important. The reality is that strategies change fast in this day and age – do you want to design a structure that will date too quickly because it followed the strategy of the day?
Much of the modern design challenge is how to set an organisation up so it can adapt without requiring major re-design every time something changes.
Ability to adapt is now a fundamental capability modern organisations need. The modern design conundrum is how to enable people, functions and teams to re-orient themselves to new challenges and opportunities as a matter of course, without having to undergo yet another disruptive, value-destroying change to hardwired structure and roles. Some change is inevitable – we can’t always foresee the future. But we can hopefully minimise the need for it by setting up adaptive structures, capabilities, roles and practices. With this kind of flexibility brings a new level of maturity required to work in these structures, but that is a topic for another time.
Doesn’t strategy follow structure as well?
Perhaps the point is not to take things too literally. Of course having a structure that is misaligned with your strategy isn’t a good idea. But the original mantra suggests a one way flow which isn’t entirely true, something that later management theorists pointed out. Henry Mintzberg reframed it a little – “Structure follows strategy… as the left foot follows the right.”
While you want to align your structure to support your strategy, your current design – including the functions you currently perform, capabilities and resources you have and how they are organised – puts constraints on how much and how fast you can change direction, and what you will even contemplate as being the core business you are in.
Most longstanding organisations of any size are a product of their history and evolution over time. They are like living organisms - strands of their corporate DNA can be followed back in time, and strands will continue on into the future, evolving and influencing decisions about strategy in years to come. Arie de Geus described this dynamic nicely in his book The Living Company. This is why many established companies extend into adjacent spaces over time, where their core competencies and values suggest this is a good idea. Their current capabilities won’t always allow them to jump from A to Z without going via other letters of the alphabet.
Is strategy the best thing to orient structure towards anyway?
The focus on strategy as a moment in time thing that we can take a snapshot of and orient our structure towards may be a bit unhelpful when strategy is changing fast. Rather than thinking simplistically about structure following strategy, perhaps we need to reframe this a little.
Structure needs to support an organisation’s system for creating value.
This system is made of people with roles and functions that collectively create, execute, and re-define the strategy over time. The system has bits that need to think about tomorrow’s value, and bits that deliver value today in the best way possible.
The design needs to set up and reinforce both of these elements, creating a productive tension between getting things done now, while taking notice of change and determining which adaptations are needed and when.