Forty years on from Alfred Chandler’s seminal book Strategy and Structure, in the following pages contemporary strategists examine the book’s impact and Chandler’s contribution to business theory.
The Pulitzer Prize-winning business historian Alfred duPont Chandler Jr, now 83, brought strategy into the modern age and championed the multi-divisional organisational form. After graduating from Harvard, he served in the US Navy before becoming, somewhat unusually, a historian at MIT in 1950. He has been professor of business history at Harvard since 1971.
Chandler’s hugely detailed research into the development of US companies between 1850 and 1920 has formed the cornerstone of much of his work. Chandler observed that organisational structures in companies such as Du Pont, Sears Roebuck, General Motors and Standard Oil were driven by the changing demands and pressures of the marketplace. He concluded that the market-driven proliferation of product lines led to a shift from a functional, monolithic organisational form to a more loosely coupled divisional structure.
Chandler was highly influential in the trend towards decentralisation among large organisations during the 1960s and 1970s. In Strategy and Structure, Chandler praised Alfred Sloan’s decentralisation of General Motors in the 1920s. He argued that the chief advantage of the multi-divisional organisation was that “it clearly removed the executives responsible for the destiny of the entire enterprise from the more routine operational responsibilities and so gave them the time, information and even psychological commitment for long-term planning and appraisal”.
While the multi-divisional form has largely fallen out of favour, another of Chandler’s theories continues to raise the blood pressure of those who care about such things. Chandler argued that strategy came before structure. Having developed the best possible strategy, companies could then determine the most appropriate organisational structure to achieve it. In the early 1960s, this was speedily accepted as a fact of life.
More recently, Chandler’s premise has been regularly questioned. In a perfect world, critics say, companies would hatch perfect strategies and then create neat structures and organisational maps. Reality, however, is a mess in which strategy and structure mix madly.