4. When We Look for the Solution in Reorganizing the Structure
When strategy execution starts to stall, it is easy to turn to organizational structure. Because structure is visible, tangible, and relatively easy to change, it often appears to be the logical place to intervene.
This article explores why that instinct can be misleading and what leaders should actually examine when strategy execution is not moving forward as expected.
Structure Matters, but It Is Not All-Powerful
Structure is not unnecessary. Quite the opposite. Structure is one of the important pillars that support strategy.
A well-aligned structure:
- is designed around the work that needs to be done, rather than around the people in the organization and their ambitions,
- reflects and supports collaboration and workflows across the organization,
- supports leadership and improves the quality of decision-making.
However, structure cannot be the sole, or even the primary, vehicle for strategy execution. It does not operate in isolation. Its impact is realized as part of the broader organizational system.
According to Jay Galbraith's STAR Model, an organization consists of five closely interconnected elements: strategy, structure, processes, rewards, and people. Structure is only one of them.
When these elements are not aligned, structure alone will not work. In fact, under such circumstances, it may not help at all and can even reduce organizational performance.
The McKinsey 7S Framework (Waterman & Peters, 1980) reinforces the same idea. It demonstrates that structure alone is not enough. Real organizational effectiveness emerges when all key elements of the organization are aligned and reinforce one another.
"Hard" Elements (More Visible and Formal)
- Strategy – What is the organization trying to achieve, and how?
- Structure – How is the organization designed and organized? (e.g., organizational chart)
- Systems – What processes, rules, and decision-making mechanisms are in place?
"Soft" Elements (Less Visible but Highly Influential)
- Shared Values – What does the organization believe in, and what forms the foundation of how it operates?
- Skills – What is the organization good at? What capabilities and competencies does it possess?
- Style – How do leaders operate, and what behaviors and examples do they set?
- Staff – Who works in the organization, and what is the composition of the workforce?
Which Structure Are We Talking About? The Formal One or the Informal One?
To understand how organizations really work, it is worth taking a step back and distinguishing between what we can see and how the organization actually operates. The two are often not the same.
The formal structure is what we see on the organizational chart.
The informal structure is how the organization actually functions in practice.
For example:
❓ How is value really created?
❓ Where and how does collaboration actually happen?
❓ Who do people turn to when they need decisions? Where are decisions really made?
❓ How does information actually flow through the organization?
And in practice, strategy execution happens far more through these informal networks than through the formal organizational structure.
This distinction is not a new insight.
👉 Henry Mintzberg pointed out early on that formal organizational structures and actual organizational functioning are often two very different worlds. Real coordination frequently happens not through the structure itself, but through relationships and informal interactions between people.
👉 Later, research on organizational networks reinforced this idea. In their classic article The Company Behind the Chart, Krackhardt and Hanson demonstrated that behind every organizational chart lies an invisible network, and that much of the actual work gets done through this network.
👉 This is also consistent with Conway's Law, which suggests that the systems organizations create tend to mirror their internal communication patterns. In other words, it is not the organizational chart that determines how an organization functions, but rather how people actually connect, communicate, and work together.
Organizational performance is therefore shaped by informal patterns, relationships, and leadership interactions. These often have a stronger influence on decision-making and collaboration than the formal structure itself.
☝️ And this is where the issue becomes truly critical.
When the formal and informal structures are not aligned, the organization begins to operate through two parallel systems: decisions are not made where they are supposed to be made, accountability becomes unclear, and information no longer flows through the official channels.
The key question is therefore not what the structure looks like, but how the organization actually works in practice.
When the formal and informal structures are not aligned, what is often referred to as the hidden organization begins to emerge. Decisions are made through informal channels, accountability becomes unclear, leaders operate through parallel systems, and strategy gradually starts to leak out of the system.
A Good Strategy Is Multi-Layered, and Structure Is One of Its Consequences
In practice, strategy is not a document or a list of goals. It is not a linear plan, nor is it simply the sum of plans created by individual business functions. Rather, it is a system of interconnected choices and the combined effect of several mutually reinforcing elements.
Strategy is about what we choose, and just as importantly, what we choose not to do.
👉 This way of thinking is also reflected in Roger Martin's approach, which views strategy not as a collection of goals but as a system of aligned choices. According to Martin, the essence of strategy lies in making clear decisions about where to play, how to win, which capabilities are required, and which systems will support those choices.
👉 A similar logic appears in Kalmár Elvira's latest book on solution-focused organizational design, Go Beyond: Solution-Focused Pocket Mentor for Work Evolutionists , where she distinguishes six layers of strategy:
- Strategic positioning of products and services
- The business and operating model
- Longer-term strategic intentions and directions
- Strategic focus areas – What is the work now?
- Budgeting aligned with the strategic focus areas
- Quarterly plans and shorter sprints
These are not separate elements. They form an interconnected, layered system that emerges through a series of decisions and agreements. If one element is unclear or weak, it immediately affects the others. Structure is not part of this system; it is an outcome of it.
Strategy becomes reality through execution. That is precisely why execution challenges cannot be solved simply by changing the organizational structure.
What Does Structure Actually Reveal?
Organizations often view structure as a visual representation of hierarchy and reporting lines.
In many cases, structures are built around people: roles are retained because they have always existed, positions are created because "there needs to be a manager here," because someone needs a place in the organization, or because reorganizations are driven by the question of where a particular person should fit.
👉 In these situations, the structure reflects people rather than the work itself.
In reality, however, structure reveals much more than that.
Structure is a reflection of how the organization operates.
Its primary purpose is not to show who reports to whom, but rather to show how value creation is organized.
It reveals, for example:
- where the focal points are: what the organization's operations are built around and what teams are organized around,
- how work is divided: by functions, products, customers, or processes,
- where decisions are made: through a centralized or decentralized model,
- what patterns of collaboration are expected: where strong connections are needed and where they are less critical,
- what the organization considers important: whatever is emphasized in the structure will also receive focus.
In this sense, structure is not the starting point. It is the consequence.
In Modern Organizations, Structure Is Less Static
We no longer think primarily in terms of fixed boxes and hierarchies, but rather in terms of:
value streams
product- or customer-focused teams
cross-functional collaboration
In this approach, structure does not constrain; it aligns and connects.
One of the key insights of agile thinking is that structure works best when it supports the natural flow of work rather than cutting across it.
And that is precisely why performance does not improve simply by redrawing the organizational structure. It improves when the way of working is clarified first, and the structure is then aligned to support it.
💬 Solution-Focused Reflection Questions and Suggestions for Leadership Teams Before Changing the Structure
Before changing the structure, it is worth pausing for a moment and asking these two questions:
❓ Where is strategy execution already working well today, and what is it about the way of working there that supports that success? (If there are examples where things are already working, the problem may not necessarily be the structure.)
❓ If strategy execution were running smoothly starting tomorrow, what would be different in the day-to-day operation? (Think in terms of decisions, collaboration, and prioritization, not structure.)
💡 If there is an area where things are working well:
- Describe it as a simple operating pattern.
💡 If you can see what needs to change:
- Choose one specific change in the way of working that you can test immediately.
- Try it in one or two other areas as well.
- Transfer the way of working, not the structure.
- Make it behavioral and concrete (who decides, what counts as a priority, how we work together).
- After 2–4 weeks, review the results: what improved and what did not?