1.2 Alfred Chandler

Chandler was a business historian who observed that the organizational structures of organizations such as General Motors, Du Pont and Standard Oil were driven by the changing demands and pressures of the marketplace. This saw moves from rigid functional organizational forms to more loosely coupled divisional structures and Chandler was influential in the decentralization of companies in the 1960s and 1970s.

Chandler defined strategy as ‘the determination of the long-term goals and objectives of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out those goals’ (Crainer and Dearlove 2003: 32). He argued that organizations, having identified their strategy, could then determine the most appropriate organizational structure in order to achieve this.

Various authors have questioned Chandler’s view that structure follows strategy. Thus, Tom Peters has argued that it is the structure of an organization that will determine, over time, the choice of markets it chooses to attack. Others have suggested that the link between strategy and structure is more complex than Chandler suggests.

Gary Hamel has offered a more positive view of Chandler’s thesis, however:

Of course, strategy and structure are inextricably intertwined. Chandler’s point was that new challenges give rise to new structures. The challenges of size and complexity, coupled with advances in communications and techniques of management control, produced divisionalization and decentralization. These same forces, several generations on, are now driving us towards new structural solutions – the federated organization, the multi-company coalition, and the virtual company. Few historians are prescient. Chandler was. (Crainer and Dearlove 2003: 32)

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1. To what extent is looking for the ‘ideal’ organizational structure a waste of time? Is it possible to have several suitable structural designs?