The Alignment of Strategy and Structure and Its Effect on Financial Performance

The Alignment of Strategy and Structure and Its Effect on Financial Performance

ABSTRACT

Both personal observation and extensive research show that some companies maintain consistent strategies and senior management while others see a revolving door of CEOs and strategies. Many of these companies also produce wide variations in their financial performance. This raises critical questions about how these differences may be connected to each other. There is a substantial body of research that shows alignment between strategy, structure and people improves organization performance. This research demonstrates that organizations who effectively align their employees, leadership, culture, structure and systems with their strategic direction deliver better financial performance. To further test these conclusions with a new research design, data was collected and analyzed on four large real estate development companies in Qatar. This included a validated employee engagement survey with global benchmark data, seven years of financial statements, interviews with employees, and review of changes in strategies and CEO's over time. The study confirmed existing research that better aligned organizations outperformed organizations that were not as well aligned. This study calls out for further research with companies in multiple industries and additional alignment measurement tools to explore more hypothesis about strategic alignment. Several recommendations to improve company performance came out of this study. 1) Employees need to be involved in strategy formation. 2) When the strategy changes, so should alignment. 3) New CEO's shouldn't always change the strategy. 4) Strategies must be clear and focused. 5) Better leadership at all levels improves implementation. 6) CEO's can have an excessive impact on results.