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20 MANAGEMENT DECISION 29,1

T
he organisation and its competitive a common measure, research reveals that the question
situation should be viewed not as of what drives organisational performance and
separate, interdependent entities but as effectiveness is more easily answered.
just different influences in the same global
environment. Initially, researchers focused on attempting to identify
those competitive situations, strategies and styles which
seemed capable of consistently producing good
performance. Results have been mixed, and it seems that
we should abandon the search for universally appropriate
strategies or management styles. Instead, it seems more
sensible to recognise that any strategy is only appropriate
The in a given set of competitive conditions. Similarly, specific
organisation cultures and/or leadership styles are only
appropriate in given strategic situations. While this

"Alignment" principle is easily understood, and, indeed, makes good


common sense, the difficulty comes in trying to
operationalise and use it.

Theory: Essentially, the principle of strategic "fit" considers the


degree of alignment that exists between competitive
situation, strategy, organisation culture and leadership

Creating
style (see Figure 1). In this sense, alignment refers to
the "appropriateness" of the various elements to one
another. Research in the USA, Europe and Australia has
revealed that superior performance (measured in a variety

Strategic Fit of ways) is associated with high degrees of alignment


between the four elements mentioned above. Accordingly,
it makes good sense to explore this principle of strategic
fit more closely.

Norman H. Chorn Dimensions of Strategic Fit


Our view of strategic fit rests on the premise that
competitive situation, strategy, culture and leadership can
Management Decision, Vol. 29 No. 1, 1991, pp. 20-4,
MCB University Press Limited, 0025-1747
be described as a combination of four "logics". These
"logics" are combined in various ways to produce a unique
competitive situation, strategy, culture or leadership style.
The approach is based on the work of Jung (personality
The Concept of Strategic " F i t " : Aligning types), Adizes (management styles), Chorn (organisation
Organisation and Environment cultures), and our own research in the fields of strategy
A wide range of views exists on the actual definition of and organisation culture. The four "logics" are presented
organisation performance. "Profitability", "market in Table I.
share", "good value for money products", and "stable
employers" are examples of the measures used by the In terms of the above, strategicfitis produced when the
various stakeholders of organisations. Despite the lack of particular combination of logics, or a "logic set", is

Table I. Four "Logics"

Logic Means Outputs Associated Phenomena

"Production" (P) Action Results Objectives, goals, energy


"Administration" (A) Control Order Systems, measurements, stability
"Development" (D) Create Change Innovation, new, discontinuing
"Integration" (I) Integrate Cohesion Synergy, teamwork, co-operation
THE "ALIGNMENT" THEORY: CREATING STRATEGIC FIT 21

Table II. Competitive Situation


Forgiving Turbulent Repetitive Predictable
Conditions: High uncertainty, low High uncertainty, high Low uncertainty, low Low uncertainty, high
competitive intensity, competitive intensity, competitive intensity, competitive intensity,
low risk high risk low risk high risk

Products/Markets: Augmented Customised "Commodity" Differentiated


products/protected products/novel products/mature products/growing
markets. People-based, markets. People-based markets. Equipment- markets. Equipment-
intangible action tangible action based, tangible action based, intangible action

Customers: Little knowledge, very Very knowledgeable, Little knowledge or Very knowledgeable,
involved in delivery and involved delivery involvement in delivery not involved in delivery

Relationship type: Continuous delivery, Discrete transactions, Discrete transactions, Continuous delivery,
membership intense relationships arm's length arm's length
relationships relationships

Structure: Changing simultaneous "Fixed" supplier- Changing


customer/supplier dominant development interactive
customer/supplier
development

Table III. Business Strategy

Protectionist Pathfinder Evolutionary Operational

Product-Market: Limited, "value- Broad, changing Limited, stable product Predictable and
added" product-line. product line. Changing line. Stable markets. changing product line.
Relatively stable markets. Growth Growth through market Predictable and
market sensitive to through product penetration changing markets.
value. Growth through development and Growth mostly through
extra value-added market development market development
services

Research and Mainly in area of Extensive R&D Limited to mostly Focused and practical.
development: "core technology". emphasis on "first to product development Emphasis on "second
Emphasis on better market'' to market" and
product/service to "getting it right"
market"

Production: Low volume-high value Customisation and High volume - low High volume - low
added. Emphasis on prototypes. Emphasis cost. Emphasis on cost. Some prototypes
improving the on effectiveness and efficiency and process
technology and unique product design engineering
delivery

Marketing: Emphasis on value Emphasis on creative, Limited mostly to Emphasis on niche


added and improving "problem-solving" increased "sales" effectiveness.
the quality. People research and innovative efforts. Price KSF Distribution KSF
KSF designs. Product KSF

Distinctive Emphasis on "quality". Emphasis on "broad" Emphasis on "deep" Emphasis on "deep


competences: Ability to develop long- approach. Spontaneity, approach. Efficient, and focused", high-
term, dependent ability to anticipate and ability to provide energy approach.
customer relationships exceed customer customers with value Reliability, accuracy,
expectations, flexibility for money, security responsive to customer
needs
KSF = Key Success Factor
22 MANAGEMENT DECISION 29,1

Table IV. Organisational Context and Culture


Group Entrepreneurial Hierarchical Rational

Organisation as a Organisation as societalOrganisation as Organisation must fight


microcosm of, in leader, role model guardian of society's for survival in a hostile
harmony with, its assets and knowledge environment
environment

Values: Loyalty, commitment, Individualism, Analysis, systems, Action, objectives,


teamwork creativity, flexibility control results

Structures: Divisional, by way of Divisional, either Functional Predominantly


project teams or product based or functional and matrix
product/market market based

Control process: Decentralised, Decentralised, Centralised, by way of Mostly centralised, by


predominantly by way predominantly by way explicit rules and way of clear sets of
of consensus, of a shared vision of regulations operating and decision
participation and philosophy guidelines and
teamwork principles

Dominant coalition: CEO, human CEO, product research CEO, production, CEO, marketing,
resources, research and development, finance and accounting process engineering,
and development market research sales, operations

Culture: Emphasis on Emphasis on Emphasis on order, Emphasis on analysis,


cohesion, teamwork, individualism, stability, information guidelines and
synergy and creativity, fast and control sustained, high levels
consensus response of activity

Closed informal Open, informal Closed, formal Open, formal


communication communication communication communication by
which is shared by which is shared which is shared on way of committees
way of cliques and with whoever a "need to know" and memoranda
membership of an happens to be basis
"inner circle" around at the time Control achieved by
Control achieved by focus on results
Control achieved by Control achieved by focus on processes
commitment to commitment to a Management
common values common vision Management support emphasises
support emphasises planning
Management Management procedures
support emphasises support emphasises Individuals are
the internal climate leading and Individual's tasks given structural
and environment inspiring are established by authority to
precedence perform their roles
Individual's tasks Individuals are
are negotiated by empowered to Rewards are based
consensus perform their roles on formal standards
and relevant results.
Rewards are based Rewards are based No deviation from
on informal on creativity and plans or performance
standards and the entrepreneurial standards
ability to maintain behaviour
internal cohesion
good team players Deviant behaviour
is tolerated
provided it is goal
directed
THE "ALIGNMENT" THEORY; CREATING STRATEGIC FIT 23

Table V. Leadership Styles


Creators and Productivity Building and
Revitalisers builders managers growth managers

Shared values: Participation, cohesion, Creativity, innovation, Control, Objectivity, facts,


change rapid response analysis results
Team style: Sensitive to people, Move very quickly, Logical, analytical, Drivers,
offer emotional support apparently haphazard provide clear structure set clear objectives for
have the ability to guided by shared vision for their subordinates their subordinates
empower subordinates

Individual Consensus building, Individualism, vision, Good analytical skills, High energy,
aptitudes: good negotiation skills, flexibility, logical, clear focus on
good conceptual ability tolerance for ambiguity desire for stability objectives,
desire for clarity

Individual Group dynamics, Technical, Accounting, Marketing,


knowledge: communications production sales

Conditions: Stable, traditional, or Turbulent, uncertain, Established, mature, Settled down,


about to change rapidly changing margins under pressure highly competitive

Strategy: Developing long term Creation of a market, Consolidation, fine Gaining market share,
relations with new product tuning, customer focus
customers, or development improving profits,
about to change productivity
strategic direction

Life cycle stage:

The logic sets are manifested by different types of


competitive situations, strategies, cultures and leadership
styles. These are described in more detail in Tables, II,
III, IV and V.

Achieving Strategic Fit and Organisation


Effectiveness
Ideally, organisation performance and effectiveness will
be optimised when, for example, an organisation responds
to a predominantly Turbulent (D) environment with a
Pathfinder (D) strategy, an Entrepreneurial (D) culture
and a Building and Creating (D) leadership style. However,
a number of points should be made in this regard:
(1) Strategic fit is an ideal state which should be
continually strived for, but is rarely achieved.
Although an organisation may achieve perfect
alignment at a specific point in time, the dynamic
nature of competitive situations and organisations
makes this a moving target. Fit is, therefore,
somewhat elusive.
replicated in the four elements of competitive situation, (2) Achieving strategic fit, now or in the future, is the
strategy, organisation culture and leadership style. In other primary task of management. Management's role,
words, "alignment" occurs when the logic sets in these therefore, is to manage the interdependences that
four elements bear a close similarity to each other, as exist between situation, strategy, culture and
Figure 1 reveals. leadership style.
24 MANAGEMENT DECISION 29,1

Management "pre-empting" competitive


changes by proactively changing strategy and
culture ahead of the market.
Management "creating" a shift in the
competitive environment by altering strategy and
culture, and so influencing customers and
competitors.
(5) The creation of misalignment within the four
elements, whether by design or by accident, is
generally associated with a reduction in the
performance of the organisation. In general, this
reduction in efficiency (measured by return on
investment, cost increases, etc.) is often the
"price" that has to be paid for a (potential) increase
in the organisations effectiveness (measured by how
closely the organisation meets the needs of the
market).
One of the insights gained by using the strategicfitconcept
(3) There are occasions where management might to study organisations relates to the way in which
deliberately cause misalignment in the short term management relates to the competitive environment and
in order to produce increased alignment in the organisational culture. This is best summed up by the
future. For example, management might be aware concept of an "interactive" style. Instead of thinking in
of future shifts in the environment which are likely terms of "reactive" (after the event) or "proactive"
to alter the competitive situation. In order to (before the event), management should realise that they
prepare the organisation for this, they will begin simultaneously create and respond to situations. In other
to ' 'change'' the culture of the organisation through words, rather than viewing the competitive situation and
modifying their own leadership style. Over time, the organisation as separate, interdependent entities, we
this culture shift will allow the organisation to should recognise that they are just different influences in
modify its strategy, and so to achieve strategic fit the same global environment.
in the future. Figure 2 illustrates this phenomenon.
(4) The model of strategic fit seems to suggest a Summary: Key Points
somewhat "deterministic approach", i.e.
management is seen to be reacting to changes in A strategy is only appropriate in a particular set
the competitive environment by modifying strategy, of competitive conditions.
culture and leadership style. This is not the Organisational cultures and leadership styles are
intention of the model at all. Rather than debating only appropriate in a given set of strategic
which way the relationship works, it is more situations.
worthwhile to recognise that strategic fit simply
implies that alignment between the four elements An "aligned'' organisation will be operating at peak
optimises organisational performance. In this way, effectiveness.
it is possible to envisage a range of scenarios. The primary task of senior managers is to manage
These include: the interdependencies between situation, strategy,
Management "reacting" to changes in the culture and leadership style.
competitive environment by shifting strategy and Businesses simultaneously create and respond to
culture. their competitive situations.

Norman H. Chorn is a Director of Gattorna Strategy Consultants, Sydney, Australia.