Grouping Activities Into Organization Units

The chief guideline here is to make strategycritical activities the main building blocks in the organization structure. If activities crucial to strategic success are to get the attention and visibility they merit, they have to be a prominent part of the organizational scheme.

When key business units and strategycritical functions take a bakseat to less important activities, they usually get fewer resources and end up with less clout in the organization's power structure than they deserve. When key units form the core of the whole organization structure, their role and power is highlighted and institutionalized.

Determining The Degree Of Authority And Independence To Give Each Unit

Companies must decide how much authority and decisionmaking latitude to give managers of each organization unit.

There are several guidelines for delegating authority to various units:

  • Activities and organizational units with a key role in strategy execution should not be subordinate to routine and nonkey activities.
  • Revenueproducing and resultsproducing activities should not be subordinate to internal support or staff functions.
  • Decisionmaking authority should be decentralized whenever lowermanagers are in a position to make better, more informed, and more timely decisions than higherlevel managers.
  • Decisionmaking authority should be centralized if higherlever managers are in the best decision making position.
  • The authority to choose a strategy for an organizational unit and to decide how to implement it should be delegated to the manager in charge of the unit.
  • Corporatelevel authority over strategic and operating decisions at the businessunit level and below should be held to a minimum.

One of the biggest exceptions to decentralizing strategy related decisions arises in diversified companies with related businesses in their portfolios, in such case, capturing strategic fit benefits is sometimes best done by centralizing decisionmaking authority.

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Strategy Implementation: Organizational Structure
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