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Structure Follows Strategy – or Does It?

May 7, 2013

Strategy Concepts

Structure follows strategyMatt, the first thing you need to do is you need to cut 40 people out of your sales organization. Matt, the second thing you need to do is reduce your headquarter staff.

These are two of the directive statements I received prior to my arrival to my new position in Europe; essentially, predefined expectations of a short-term reduction in the organization that I had inherited.

Why? It’s probably a natural reaction especially from business leaders outside of the country.  We were sitting in a collapsing economy, with crashing prices, poor availability of cash, high national and personal debt load, sky-high unemployment and the only viable option people could see to survive depended on rapid and massive reductions in the costs of our organization.

And so, clearly, one of the first questions I needed to answer was if those things were, in fact, our only set of options for survival.  That we must make an immediate reduction in the organization.

And it got me thinking that a good topic, here, might be the concept of structure versus strategy and the implications of the relationship therein.

Structure FOLLOWS Strategy

So generally the concept of structure versus strategy is that structure follows strategy. What that means is we build to our strategy. We build based on what we’re trying to execute, where we’re trying to go and that future state of our business that we want to create.  But without a strategy, we’ll build toward what we think the world will hand to us.

And so that being said, our organization had an immediate, visceral reaction to the market situation and the vision of the future and landed on our need to cut the organization, to cut staff (and at a quite severe level) in order to survive in the short-term and manage the profitability of the business.

But I pushed back, bought a little time.  Why?  Because the direction was being given without a strategy.  I thought that even if we could only make one or two years of a strategic plan, we could at least make an organizational decision based on something other than the immediate short-term.

And the reason I say that is let’s say we would have made an analysis and that we expected major recovery in the market or a major new customer or we found a new channel and we should have redeployed assets. And if we had already cut resources, we will have completely eliminated an opportunity for growth, for long term stability, for recovering the business.

For the cost of a few weeks or months of analytical time we could understand where this business can go in the future and ensure we have the right resources for that situation.

1 or 100, the Same

Now, I use the numbers for my organization, saying cutting 40 people or cutting headquarters staff. But this could be a one person, this could be a two-person team or a couple of hundred person-team, the concept is still the same – you build or you grow, expand or contract based on your strategy and you redeploy your resources based on your strategy. Even if that’s just one other person, we want to deploy/redeploy that person based on the strategy and based on the focus, based on the priorities, and based on the opportunities or risks that have been analyzed.

And so this is a bit of a cautionary tale, too, about intent to hire.  I just want to hire somebody. I got to hire some people. I got lots of stuff to do.

As much for intent to fire.  Things are tough, I’ve got two people working for me. I’m going to cut one.

Well, what if that one person could have been deployed to attend to a new customer or a new channel and could have actually grown your business, or at least covered their own expenses, that would be an opportunity lost. Until we have that strategy, that clarity, we need to make our resource decisions with caution.

And I’ll caveat this entire conversation, saying, in a corporate environment, we’re not talking as much about real “survival” as we might be in an entrepreneurial environment or in a personal business environment where a rapid response to changing market situation and a staff reduction or a cost reduction has a direct effect on personal family income.

But even in a situation of personal business, small business, an entrepreneurial setting, some time to validate the decisions on our personnel or our resources, our staff, or our teams against the strategy that we’re going to execute needs to happen. Even if that’s only a week’s discussion and thought process around where’s the business going, our resource decisions need to be vetted against that analysis.

We’ll continue this discussion in Part II of Structure Follows Strategy.

Today, think about your structure. Has it been balanced and bounced against your strategy?  When was the last time you looked at your strategy in light of the team or the resources that you’re putting against that strategy to execute it and drive for a successful outcome?

Leave some comments below. I’d love to hear about your thoughts on strategy and structure and what changes or insights that you’ve had in your own experiences.

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