Organizational Design for Strategy Implementation

Structure Follows Strategy

Alfred Chandler in 1962 demonstrated: organizational structure should follow strategy. If the strategy has changed, but the structure has not — effectiveness decreases.

Types of Organizational Structures

Functional structure — divisions by function (marketing, production, finance). Effective for operational specialization, works poorly for diversified business.

Divisional structure — divisions by products, markets, or geography. Each division is a "mini-company." Quick response to the market, but duplication of functions.

Matrix structure — dual reporting: by function and by product/project. Theoretically efficient, but practically — "matrix = chaos" without strong culture and clear processes.

Network/project structure — small core + external partners/contractors. Flexibility is maximal, but requires strong contractor management.

Center vs Periphery: Balancing

Centralization: unified standards, economies of scale, risk control. Decentralization: speed of response, motivation, proximity to the market.

There is no single correct answer. The trend of recent years: "federalization" — the core standardizes what is critically important (risk management, branding, financial reporting), everything else — at the discretion of local units.

Span of Control and Levels of Hierarchy

How many subordinates does one manager have (span of control)? The more complex the work — the fewer; the more standardized — the more. Fewer layers → faster decisions → higher motivation. Amazon: the "two pizza" principle — a team should not be larger than can be fed with two pizzas.

Practical Assignment

A technology startup (200 people, product — B2B SaaS) has a functional structure. It is entering 3 new markets (Russia, UAE, Southeast Asia). Is reorganization necessary? Propose a new structure and justify your choice. What are the risks of the new structure?