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Successful American Companies

Early in 1977, a general concern with the problems of management effectiveness, and a particular concern with the nature of the relationship between strategy, structure, and management effectiveness, led us (the authors) to assemble two internal task forces at McKensey & Company. One was to review our thinking on strategy, and the other was to go back to the drawing board on organizational effectiveness

Successful American Companies

Way back in 1962, the business historian Alfred Chandler wrote “Strategy and Structure”, in which he expressed the very powerful notion that structure follows strategy. And the conventional wisdom in 1977 was that Chandler’s dictum gad the makings of universal truth. Get the strategic plan down on paper and the right organization structure will pop out with ease, grace and beauty. Chandler’s idea was important, no doubt about that; but when Chandler conceived it everyone was diversifying , and what Chandler most clearly captured was that a strategy of broad diversification dictates a structure marked by descentralization. Form follows function. For the period following World War II through about 1970, Chandler’s advice was enough to cause (or maintain) a revolution in management practice that was directionally correct.

Successful American Companies

The stream that today’s researchers are tapping is an old one, started in the late 1930s by Elton Mayo and Chester Barnard, both at Harvard. In various way, both challenged ideas put forward by Max Weber, who defined the bureaucratic form of organization, and Frederick Taylor, who implied that management really can be made into an exact science.

Successful American Companies

The researcher Henry Mintzberg, of Canada’s McGill University made one of the few rigorous studies of how effective managers use their time. They don’t regularly block out large chunks of time for planning, organizing, motivating, and controlling,as most authorities suggest they ought. Their time,on the contrary, is fragmented, the average interval devoted to any one issue being nine minutes. Andrew Pettigrew, a British researcher, studied the politics of strategic decisions making and was fascinated by the inertial properties of organizations.

Criteria for Success

An excellent example is McDonald’s. As successful as that corporation was in the United States, doing well abroad meant more than creating an international division. In the case of McDonald’s it meant, among other things, teaching the German public what a hamburger is. To become less dependent on government sales, Boeing had to build the skill to sell its wares in the commercial market-place, a feat most of its competitors never could pull off. Such skill building, adding new muscle, schucking old habits, getting really good at something new to the culture, is difficult. That sort of thing clearly goes beyond structure.