The Role of Strategy And Structure in Understanding Business Organizational Behavior
components, such as strategy and organizational structure, have a place in the
business' organizational behavior. These are all key components of a business'
function and identity, so it's not much of a stretch to consider how they are
all connected to each other. This article will explore the roles that strategy
and structure play in both business and organizational behavior.
Structure's Role in Organizational Behavior
Strategy and structure are
two separate concepts in business that affect multiple aspects. Strategy serves
as a plan of action for the business, determining what the business is going to
do next, how they're going to do it, and when. It predates the business'
structure, since the creation of an organizational structure requires planning
for its execution.1 The entire layout of the business down to the
last detail needs to be carefully planned in order for it to be a cohesive
structure that works. This includes the organizational behavior that will be
present in the business amongst the staff. Strategy also impacts organizational
behavior through changes: improvements to any of its components, adjustments to
expansion and company growth, and tactics to maintain it, to name a few.
In terms of structure, it
lays the foundation that a business' organizational behavior is based upon.
Structure dictates how the business will be divided, its staff size-both in
regards to the business as a whole and in individual departments and groups-the
details of leadership positions, budget restrictions, policies, and so on.2
Nearly everything that determines the details of organizational
behavior's components is decided upon in the business' structure. Improvements
to organizational behavior typically affect the structure, as things like
policies tend to need modification. Often, issues within the structure as the
business grows and expands will impact the organizational behavior of the
business in a negative light. Changes, good or bad, in either will be reflected
in the other to some degree.
Why is Strategy
As mentioned, strategy is
one of the first things that a business does when they first get started. It's
the planning stage that can be repeated throughout a business' lifespan as it
grows and focuses on the vision business owners have. Strategy is a critical component
to the success of a business, as it helps dictate where the company is headed. Businesses
that frequently use strategy management in their daily operations regularly
reap the benefits of having things laid out in advance. It's hard work, but so
very worth it.
To give you a better idea of
the importance of strategy, here are a few of the things that its inclusion can
businesses use strategy tactics to plan for the future. In addition to a
business plan-which covers the operational and structural details of the
business-most companies will put together a strategic plan. The strategic plan
details the goals and objectives the business wants to meet, usually within the
next few years.3 Both documents act as guides for what they business
expects to accomplish and how in each of its departments. These goals can
involve anything from physical growth to marketing and customer retention. They
are updated as things change, or once the plan(s) have reached their expiration
date, to allow for a continued strategy to be in place. More than anything
else, it helps the business stay on track and gives them a fallback for when
things go awry.
Establishing Strengths and Weaknesses-Strategizing gives a business a chance to analyze its strengths
and weaknesses so it can improve.4 While a business often knows
itself well enough to know what it is capable of, there may be areas that need
more attention than management realized. Regular strategic analysis can even
track growth over time and allow the business to be continually aware of its
strengths and weaknesses. That awareness gives the business a chance to direct
its focus appropriately and handle problems before they get out of hand.
some idea of what to you may encounter during a task or situation, it is
possible that you may over- or undercompensate in your planning. When you pack
for a trip, for example, you make sure that you have enough toiletries and
clothing. If you miscalculate, you end up with an overflowing suitcase or a
day's change of clothes short. In a business setting, poor planning can lead to
issues in productivity and a waste of resources. When it happens consistently,
things can get costly. Strategy can largely help reduce waste by informing a
business of what they will need and how much of it.
business is nothing without its clients. A lot of businesses will focus on how
to gain more customers, but they also need to look at how they can retain the
ones they already have. Strategy lets them look at what they are doing and how
the customer base is reacting to it. What attracted them in the first place?
Why are they not sticking around? What's bringing back the ones who are
returning? The answers to questions like these can be attained through the use
of strategy to look at the business' practices and sales. Such information can
then be adapted for usage in a plan of action.
Organizational Structure in Business
Structure's key role in
business and organizational behavior means that it needs to be taken very
seriously by business owners and leaders. Mistakes in a business'
organizational structure can impact its functionality and set it up for failure
from the start. Omitting crucial parts or including elements that are
unnecessary can put a strain on things like resources as the business attempts
to make up for the damage.
Setting up a business
structure requires choosing a structure type and using it as a framework. The
primary function will dictate the division and flow of power within the
business, so that tends to be the first thing that needs to be decided upon.
Information such as the business' size and industry will also need to be taken
into consideration, as some structure types will work better than others based
on those components.
businesses have some form of hierarchy built into its structure for the chain
of command. Hierarchical business structures tend to be the most common and can
be easily combined with other types. There needs to be a steady flow of
information in a hierarchical structure, as blocks anywhere along the way can
cause stagnation that impacts the business.5 It's a largely
bureaucratic option and can set up a barrier between the layers of power, which
may not present a lot of opportunity for collaboration. More businesses are
looking for alternatives to this style, but many have chosen to put their own
twist on it and make their own unique version of a hierarchy for their
business. One such example is a flatarchy, which removes the levels of a
hierarchy and puts positions on equal footing.
rather practical form, functional business structures a business into groups
that have a primary focus. Think along the lines of departments that handle one
part of the business operations, like sales or marketing.6 While
this is a fairly standard set-up, it's a simple one that is suited best for
smaller businesses. Larger companies will usually use a similar structure or a
modified one that can better handle its size and workload. There's less
interaction between departments due to how the rest of the business'
organization is designed and the separation of work.
structures divide a company based on things like projects and products. This
works best for companies that have subsidies or multiple brands under their
control.7 A lot of major companies fall into this category and use
this structure to keep things organized. An example of a divisional structure
in action would be Gap, which three different stores-Gap, Banana Republic, and
Old Navy-under its control. Each is its own separate entity, but is united
under a single brand. Such companies would be incredibly chaotic and difficult
to manage without the division in place to keep things in order.
matrix structure combines features of functional and divisional structures into
one. It's a hybrid of sorts and it may even include traits from hierarchies to
make itself fully functional. Most of the large, international companies that
operate in today's markets are set up in a matrix structure. It's a far more
complex and extensive option compared to the others. There's more flexibility
in a matrix structure, but it's prone to power struggles and disarray between
areas of similar interest or function.
There are also legal
structures that a business must choose from for tax purposes.
businesses that are made up of a single employee: the owner.8 It's a
very basic set-up and it only gets complicated when more people are added to the
known as Co-ops, those using the service are involved in the business'
ownership and operations as a member.9
are owned by several individuals. There are general partnerships-everyone owns,
manages, and is liable for the company equally-and limited-some general
ownership with partner(s) who act as investors.
expensive, and has separate owners and operators. It carries more legal
liability protection but more regulations.
Limited Liability Company (LLC)-Often considered to be a miniaturized version of a
corporation mixed with a partnership.
Corporations are created only through special circumstances with the IRS.
Existing corporations can be eligible for status as an S Corporation should
they meet the requirements and are chosen.10
How to Develop or
Improve a Business Structure
Regardless of where a
business stands in its life-either in the process of being created or already a
century old-it can always improve or develop a new structure. It takes some
careful planning and attention if you're revamping an older structure, so proceed
with caution. Brand new businesses should also be considerate as they develop
their structure, as this is the framework that they will build the rest of the
business on. Some things to keep in mind for either circumstance:
Know the Types-Both
the legal and organizational types. As a business grows, its status may
significantly change and require that a new type be implemented. Choosing the
wrong structural option can be like constructing a building with walls in the
wrong places; it's not going to stay standing for very long unless its fixed.11
It can be a bigger issue if you choose the wrong legal structure, as that
is information that needs to be submitted to the government. Organizations like
the IRS might choose to take a look at your business when they notice errors or
differences between its structure and its other traits. As a result, there
could be penalties that you will have to pay.
Establish The Rules-Deciding
upon the basic policies and features of a business before you choose a
structure can help narrow down the options. The rules set the tone of the daily
operations and the business' organizational culture; if the structure doesn't
match, neither will be able to work efficiently.12 Think of the
basics of the business, like its size and focus, in regards to the rules to
give you a better idea of its structural needs.
Make It Adaptable-As
a business grows, it's primary features need to keep up and adapt to changes.
The structure of a business will be one of the things that is affected the most
by expansions and changes, so this will be a necessary factor to include. Applying
information gained from strategizing and preparing for the business's future
can help you create a flexible structure designed to last.13 Look at
what is going on in the industry your business is a part of and see what is
going to be necessary for success in the coming years. Take into account things
like new management, employee turnover, production demands, changes in the
economy, and professional goals.