Structure follows strategy

In management theory, the thesis that Structure follows Strategy was proposed by the historian Alfred Chandler. This means that a corporate structure is created in order to implement a given corporate strategy.

Chandler substantiated his Structure follows Strategy thesis based on four case studies of American conglomerates that dominated their industry from the 1920s onward. Chandler described how the chemical company Du Pont, the automobile manufacturer General Motors, the energy company Standard Oil of New Jersey and the retailer Sears Roebuck managed a growth and diversification strategy by adopting the revolutionary multi-division form. The M-Form is a corporate federation of semi-independent product or geographic groups plus a headquarters that oversees the corporate strategy and coordinates interdependencies.

Although the organizational M-form was implemented differently by each of the organizations, Chandler showed that the need to restructure arose from a strategic shift driven by new technologies and market changes. The M-form emerged and co-evolved with the development of the transportation and communication industries thereby creating the opportunity to manage across time and space.

He described corporate strategy as the determination of long-term goals and objectives, the adoption of courses of action and associated allocation of resources required to achieve goals; he defined structure as the design of the organization through which strategy is administered. Changes in an organization’s strategy led to new administrative problems which, in turn, required a new or refashioned structure for the successful implementation of the new strategy.

Chandler’s thesis argued that new organizational forms are no more than a derivative of strategy as he defined it.

Hall and Saias inverted Chandler’s thesis, suggesting that Strategy Follows Structure. For example, they point out that a multidivisional structure biases a firm towards a conglomerate strategy.

Henry Mintzberg offered a balanced view, arguing that the relationship between strategy and structure is reciprocal. „Structure follows strategy … as the left foot follows the right.“

Chandler, A.D. Jr. (1962). Strategy and Structure: Chapters in the History of the American Industrial Enterprise. Cambridge, MA: MIT Press

Hall, D.J. and Saias, M.A. (1980). Strategy Follows Structure! Strategic Management Journal, Vol 1 No 2 (April-June 1980) 149-163

Mintzberg, H. (1990). The Design School: Reconsidering the Basic Premises of Strategic Management Strategic Management Journal, Vol 11 No 3 (March-April 1990) 171-195

Jennifer Nwachukwu, The introduction of Strategy and structure (????)