Structure follows strategy so they say. Got me thinking. Who is “they” and where did this statement actually comefrom? Well apparently it was coined by A.D. Chandler in 1962 that states that organizational structure of corporation (the divisions, departments, teams, processes and technology) are designed to achieve a firm’s strategy.
Well for us we are going to take it up a level. From the business perspective, the hierarchy of organisation and responsibility is captured in the following diagram.
The Board is responsible for executing the wishes of the Owners. It is legally responsible for meeting the compliance obligations of the company. It sets and endorses the strategy within the agreed risk appetite. It appoints and manages the Chief Executive Officer who in turn hires the necessary executive to manage the business. The business will establish what is known as the “Target Operating Model”, which is the organizational structure required to fulfil the approved strategy. The exact form will vary, but at its core it will include the following areas:
• Income – generate sales revenue for the business
• Operations – manage the delivery of the business products and services
• Finance – manage the financial components including capital allocation, revenue collection, supplier disbursement, expense management of the business
• People – manage the human capital elements of the business
• Income – generate sales revenue for the business
• Operations – manage the delivery of the business products and services
• Finance – manage the financial components including capital allocation, revenue collection, supplier disbursement, expense management of the business
• People – manage the human capital elements of the business
