Organizational structure gives the organization form. The organization is the tool for strategy implementation. The organizational structure helps channel human resources to meet business objectives. Business objectives are enunciated in the business strategy. The business strategy itself flows from the vision of the company’s board and Founders. Companies are effective and perform optimally when all three components defined above – vision, business strategy, and organizational structure are fully aligned and operate seamlessly. When the organizational structure fully syncs with the vision and strategy, sustained growth and performance are observed.
Let me illustrate this with an example.
Apple’s business strategy emphasizes product design. It has a strategy that has led to its creating iconic products. Unlike many other organizations, the product design division reports directly to Apple‘s leadership team and the board. Product design decisions are quick, and design innovation gets the highest priority. The rest of Apple’s organization is similar to other companies. The unique focus on design is seen in the organizational structure and is helping the company to come up with products that customers love repeatedly.
SpaceX and Tesla have an agile organizational structure, on the other hand. The emphasis is on fungibility and rapid deployment of resources to a project area that requires attention. Hierarchy is unimportant, and communication with the top leadership, including Musk, is instantaneous. These organizations appear disorderly and chaotic to a traditional organizational design person. But the agile organizational structure and design are helping it achieve innovation which is critical to the nature of these corporations. for which these companies are now known. The founder’s vision of innovation and focus on disruptive technology is reflected in the structure of these companies. The decision to create Tesla as more than an electric car company is seen in its business strategy, where Giga factories are the additional focus area. In Space X, the strategy and vision are seen in the development of reusable rockets.
Organizational structures, therefore, require continuously evolving and changing with business strategy.