CONTENTS

INTRODUCTION......................................................................................................................1
Organizational Structure and Strategy....................................................................................1
Decentralization......................................................................................................................2
IMPACT OF DECENTRALIZATION A MANAGER AND THE RELATIONSHIP
BETWEEN ORGANIZATIONAL STRATEGY AND ORGANIZATIONAL STRUCTURE
....................................................................................................................................................3
Responsibilities of managers in a Decentralized system........................................................3
The Relationship between Organizational Strategy and Organizational Structure................4
CONCLUSION..........................................................................................................................6
BIBLIOGRAPHY......................................................................................................................8

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INTRODUCTION

Organizational Structure and Strategy

Organizational structure and strategy are two very closely related yet very different concepts.
In order to fully understand this presentation one needs to understand what organizational
structure is and what strategy is, the relationship between the two. Then there will be need to
understand the concept of decentralization and how it affects managers

“An organizational strategy is the sum of the actions a company intends to take to achieve
long-term goals” (Sophie Johnson, 2018). Strategy therefore refers to a set of well-defined
short term actions which are all aimed at achieving a long-term goal. Together they make up
what is known as a strategic plan. Strategic plans require involvement from all organization
levels. Top management creates the larger organizational strategy, while middle and lower
management adopt goals and plans to fulfill the overall strategy step by step.

An organization’s strategic plan encompasses its mission and vision. An organization’s vision
describes what the company will have achieved in fulfilling its mission. From the vision
follows the long-term goals of an organizational strategy. Organizational strategy must arise
from an organizational mission, which explains why an organization is in business. The
mission and vision therefore guide all strategic decisions.

According to Investopedia, “An organizational structure is a system that outlines how certain
activities are directed in order to achieve the goals of an organization”. These activities
include rules, roles and responsibilities and how information flows from level to level within
the Organization. Organizational structure is therefore a specific hierarchy within an
organization. An organizational structure defines each employee's job and how it fits within
the overall system. This structuring provides a company with a visual representation of how it
is shaped and how it can best move forward in achieving its goals.

There are four common types of organizational structure. These include the functional
structure, divisional or multidivisional structure, matrix structure and flatarchy. The most
common, is a functional structure. This is also referred to as a bureaucratic organizational
structure. It breaks up a company based on the specialization of its workforce dividing the
firm into functional departments such as marketing, sales and operations.

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With the divisional or multidivisional structure, an organization structures its leadership team
based on the products, projects or subsidiaries they operate. This structure is therefore
common among larger organizations. A good example of this structure is Unilever. With a
wide range of products, the company structures itself so each business unit operates as its
own company with its own president.

The third organizational structure is a matrix structure. This structure places employees
across different superiors, divisions or departments. An employee working for an
organization that uses this structure for example, may have duties in both sales and customer
It is not very common in Zambia and more common in the western world.

Flatarchy is a newer structure. As the name alludes, it flattens the hierarchy and chain of
command and gives its employees a lot of autonomy. Companies that use this type of
structure have a high speed of implementation. It is also not very common in Africa in
general and in Zambia in particular.

Decentralization

The concept of decentralization has a close relationship with the organizational structure and
strategy. Regardless of the type, an organizational structure is either centralized or
decentralized. “Decentralization refers to tire systematic effort to delegate to the lowest levels
all authority except that which can only be exercised at central points.” —Louis A. Allen.
Decentralization can be viewed as an extension of delegation. When a part of the work is
entrusted to others, it is known as delegation. Decentralization extends a varied degree of
decision making authority to the lowest level of the organization. Traditionally, organizations
have been structured with centralized leadership and a defined chain of command. The best
example of a centralized structure is the Zambia Defense Force with it’s with a long and
specific hierarchy of superiors and subordinates. At the very top is the Commander in Chief
who is also the president of the Republic of Zambia. Immediately below the president are the
defense chiefs each with several men and women under their command. All operations are
conducted in this strict top-down approach. However, there has been a rise in decentralized
organizations, as is the case with many technology startups. This allows the companies to
remain fast, agile and adaptable, with almost every employee receiving a high level of
personal agency. Decentralization provides an opportunity to reduce or completely get rid of
all the inefficiency associated with a centralized organizational structure especially those

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related to the high level of bureaucracy associated with such a structure. Decentralization also
comes with challenges that have to be mitigated in order for the positive aspects of it to be
fully appreciated by an organization.

Decentralization thus has a positive and negative impact on one as a manager in an

organization which are looked at in more detail in subsequent section of the report.

IMPACT OF DECENTRALIZATION A MANAGER AND THE RELATIONSHIP

BETWEEN ORGANIZATIONAL STRATEGY AND ORGANIZATIONAL
STRUCTURE

Responsibilities of managers in a Decentralized system

As authority in an organization becomes decentralized, managers will be expected to provide

more results and will have to show a higher level of accountability in the organization.
“Decentralized companies spread responsibility to different levels of management rather
than focusing decision-making power at the top” (Azcentral, 2018). Depending on the
organizational strategic plan each organization may have its unique set of goals for its
managers but what is presented in this section are general expectations across all
organizations with an organized structure. Because a manager has more authority in an
organization as a result of decentralization, the following may be expected of a manger:

1. Return on Investment

The first thing that may be expected of a manger is a higher return an investment since more
authority and thus decision making power is vested in that individual manager. According to
Devra Gartenstein who wrote a report on how to measure performance of management
Measures of profitability and customer satisfaction help to evaluate creativity, which yields
both additional revenue and enhanced customer experience Because most companies exist
primarily to make money, it is useful to evaluate decentralized performance results in terms
of amounts earned relative to sums invested (Azcentral, 2018). This shows that there is likely
to be emphasis on performance among managers in a decentralized system that in a
centralized one. With more decision making power in the organization, an evaluation of the
manger’s performance would emphasize tangible elements of output. “Investments include
infrastructure to launch a project and dedicated materials and labor required to bring the
process to fruition” (Devra Gartenstein, 2018).

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2. Skills Development and Growth

Managers would be expected to have a high level of competency in the discharge of their
duties and it would be expected of them to pass on these skills to their subordinates.
“Decentralized management succeeds when individuals and teams build knowledge and
skills over time, enabling them to function effectively and creatively” (Devra Gartenstein,
2018). This usually reflects in the performance evaluations of managers in decentralized
system where Skills development is an important part of these evaluations.

3. Customer Satisfaction

There is also a level of customer satisfaction to be accomplished by the manager depending

on the level of authority granted to the manger in question. “Customer satisfaction is key to
business success, and measuring it in reference to specific projects and responsibility centers
yields valuable information for evaluating performance in a decentralized organization.
Customer-retention data provides insights into customer satisfaction because satisfied
customers are more likely to return for repeat business” (Devra Gartenstein, 2018).

As earlier stated above, one it is expected that each organization will have its unique goals
for its managers that suit its own goals. However the above stated goals are the general
goals.

The Relationship between Organizational Strategy and Organizational Structure

From the evolution of the report so far, it is quite clear that organizational structure is
determined by organizational strategy and not the other way round. That is to say, all aspects
of an organization’s structure from the creation of divisions and departments to the
designation of reporting relationships are made while keeping the organization’s strategic
intent in mind. The theory that structure follows strategy was coined by the historian Alfred
Chandler of Harvard Business School. He wrote a book published in 1977 on the history of
strategic decision making at the highest levels of Corporate America, including DuPont,
General Motors, Standard Oil and Sears Roebuck. The book was called The Visible Hand:
The Managerial Revolution in American Business.

Strategy lines up the arenas and markets in which a company will compete, proclaims a
targeted customer base and asserts the matters by which an organization will seek to
differentiate itself. This is not only a theoretical stand point but a practical one in the real

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world. Because of its practicality in the real world, it is also backed by many scholars.
Chandler described how the successful progress of mid-twentieth century General Motors
can be attributed to the strategic foresight of Alfred P. Sloan, who laid out the famous
divisions of the General Motors Company. This line includes Chevrolet, Pontiac, Oldsmobile
Buick and Cadillac, listed here in order of pricing segment and lined up with market
segments so that each division could seek to please an intended customer segment.

An example that is closer to home is that of decentralization in the Zambian local

government system. This is a good example of an organization that adopts its structure to
follow its strategic goals and a good example of the practicality of the theory that structure
follows strategy i.e. a set of goals all aimed to improve administrative performance (though
this could be debatable in political circles, which is beyond the scope of this report).

At independence, Zambia inherited a fragmented administrative structure from colonial the

colonial administration: a diffuse collection of government departments enjoying a large
measure of autonomy and only loosely controlled by any central, coordinating body, whether
bureaucratic or political (Dresang, 1975). Zambia's government found the inherited
administrative structure unsuitable for meeting its political and economic objectives, and
concluded that administrative reforms were necessary as Tordoff (1980, p.185) notes “one of
the Zambian Government's most urgent tasks in 1964 was to transform the inherited
structure of provincial administration - the focal point of the colonial system of government -
into an instrument of economic development”. The Zambian government made the following
changes to its structure in order to improve service delivery:

 The Local Courts Department of the Ministry of Justice took over the reorganization
and running of the old native authority courts (Zambia, 1966a, p.2)
 Responsibility for law and order was devolved on the police, although local
authorities retained a small force of constables to assist in the enforcement of council
bye-laws.
 The Ministry of Local Government became responsible for supervising the rural local
authorities through its own cadre of local government officers (Tordoff, 1980, p.
185).
 Further, many important functions of the native authorities were not inherited by the
new rural councils but by central government instead e.g. these included
responsibility for agriculture, conservation and primary education.

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 More recently decentralization in Zambia has occurred through the development of
provincial and district administration since the PF administration took power. Ideally,
provincial and district government in Zambia has been conducted for the purpose of
coordinating government work at district and provincial levels while also permitting the
performance of responsibilities for which no special agency has existed or for which a
special agency might exist but lacks local level representation by its own staff. Traditionally
decentralization in Zambia has been done by strengthening and extension of the inherited
system of field administration, whereby various central government ministries are
represented in the provinces and districts by local staff. Such staff are accountable to their
respective district and provincial heads, who are in turn accountable to departmental or
ministerial headquarters in Lusaka.

The examples above a living proof of the fact that an organization continuously adapts its
structure to achieve its strategy. This clearly shows that structure follows strategy. Adapting a
structure to the strategy will have the following advantages (Azcentral, 2018):

 Aligns the organization to best follow strategic direction

 Allows for clearly defined roles and responsibilities
 Clarifies who makes what decisions.
 Enables clear accountability.
 Minimizes handoffs that affect the customer experience. Minimizes the customer
“runaround.”
 Minimizes handoffs that create confusion over who is responsible for what outcomes.
 Pulls together the people who most need to work closely with each other.
 Allows information to flow unrestricted to those who need it.
 Creates manageable spans of control.
 Is augmented by informal channels of cross boundary communication.

It is clear therefore both from practicality and form theory that structure follows strategy. This
provides a lot of advantages for the organization that follows it.

CONCLUSION

An organizational strategy is the sum of the actions a company intends to take to achieve long-
term goals. It is a set of well-defined short term actions which are all aimed at achieving a

6
long-term goal. Together they make up what is known as a strategic plan. An organizational
structure is a system that outlines how certain activities are directed in order to achieve the
goals of an organization”. These activities include rules, roles and responsibilities and how
information flows from level to level within the Organization. Organizational structure is
therefore a specific hierarchy within an organization. There are four common types of
organizational structure. These include the functional structure, divisional or multidivisional
structure, matrix structure and flatarchy. The most common, is a functional structure.
Regardless of the type, an organizational structure is either centralized or decentralized.
Decentralization refers to tire systematic effort to delegate to the lowest levels all authority
except that which can only be exercised at central points. Because a manager has more
authority in an organization as a result of decentralization, s/he is expected to deliver higher
return on investment, customer satisfaction and skills development and growth.

Organizational structure is determined by organizational strategy which means that all aspects
of an organization’s structure from the creation of divisions and departments to the
designation of reporting relationships are made while keeping the organization’s strategic
intent in mind. The theory that structure follows strategy was coined by the historian Alfred
Chandler of Harvard Business School. This provides a set of advantages for the organization
that follows it. These include are Aligning the organization to best follow strategic direction,
allowing for clearly defined roles and responsibilities, clarifying who makes what decisions,
enabling clear accountability, minimizing handoffs that affect the customer experience,
minimizing handoffs that create confusion over who is responsible for what outcomes,
pulling together the people who most need to work closely with each other, allowing
information to flow unrestricted to those who need it and creating manageable spans of
control.

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BIBLIOGRAPHY

Dresang, D.L. (1975), The Zambia Civil Service (East African Publishing House, Nairobi).

Fesler, J.W. (I 965), “Approaches to the Understanding of Decentralisation”, Journal of

Politics, Vol.27, No.3, pp.536-566.

Tordoff, W. (1968), “Provincial and District Government in Zambia, Part II”, Journal of
Administration Overseas, Vol. VII, No.4, pp.538-545.

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

Chron. “What is the meaning of organization strategy?” http://www.smallbisiness.com,

Stephen Johnson.

Investopedia. “Organizational Structure.” http://www.investopedia.com

Your Business. “What is decentralization?” http://www.yourbusiness.com, Azcentral, Devra

Gartenstein, Luois A Allen