It is well established, in research studies over many years, that well-aligned organisations perform better than poorly aligned ones.

One of the pioneering studies, published in the Strategic Management Journal in 1992 (1), discovered that 30% of the variation in profit between 113 businesses was accounted for by the degree of organisational alignment within those businesses.

More recent studies have confirmed this relationship. SAP research (2), for example, compared the most and least financially successful of a sample of corporations of different sizes. They found that 44% of the most successful corporations had their managerial goals completely aligned; none of the least successful had such alignment.

The business benefits of organisational alignment include, in different research studies, increased competitive advantage, increased revenues, reduced costs and increased profits.

This is not really that surprising. We would expect companies with their employees aligned in pursuit of agreed strategic goals to do better than those with either misaligned employees or unclear strategy.

It is, perhaps, more surprising that alignment is relatively unimportant for a few companies.  Sabherwal and Chan (3) found business performance uncorrelated with degree of alignment in companies operating a defensive strategy (i.e. defending market share by cutting costs and competing on price). Conversely, several studies (4) have highlighted the increased importance of organisational alignment during periods of rapid change or disruption of their business environment (e.g. following deregulation).

Next, let’s zoom in closer and explore how organisational alignment delivers its business benefits.

Firstly, there are a number of logical consequences of alignment:

  • Well-aligned organisations tend to have greater consistency in their presentation of brand, product and service propositions;
  • This therefore means, well-aligned organisations will tend to give rise to less confusion in the minds of both prospects and customers;
  • As a result, well-aligned organisations will usually have shorter sales cycles.

Secondly, there are benefits for the people working in well-aligned organisations:

  • Employees are more engaged because organisational alignment connects their role to the strategic objectives of the organisation;
  • This therefore means employee performance will usually be higher in well-aligned organisations;
  • As a result;
    • Employee turnover will usually be lower in well-aligned organisations;
    • Team leaders and senior managers have more credibility and respect in well-aligned organisations;
    • Performance reviews in well-aligned organisations will tend to be better informed, more evidence-based, less stressful and more effective in driving performance improvements.

Thirdly, there are organisational efficiencies that arise from alignment:

  • Since alignment necessitates greater clarity about who does what and why within the organisation, there is usually greater transparency over organisation design and greater resource visibility;
  • As a result, inefficient use of resources, such as hoarding of budget or head-count, is easier to spot and eliminate;
  • Well-aligned organisations also tend to be better at risk management: there is more consensus over what constitutes a risk and there are more people better able to spot risks than in a misaligned organisation.

Fourthly, and perhaps most surprisingly, well-aligned organisations show greater agility:

  • In Paul Tallon and Alain Pinsonneault’s 2011 study of 214 companies (4) they found that having IT infrastructure aligned with organisational strategy delivered significant benefits in business performance, which is in line with many other studies. What was unique about this study however, is that they found ‘the effect of alignment on performance is fully mediated by agility’. In other words, the reason well-aligned organisations perform better than misaligned ones is because they are more agile.
  • The reason for this greater agility has not been teased apart scientifically but it is thought to be because more people within the organisation are able to make, and trusted to make, more decisions, faster decisions and better decisions than people in a misaligned organisation.

Research has clearly and repeatedly shown that well-aligned organisations outperform less well aligned organisations. The importance of alignment increases substantially, the more an organisation is changing.

In conclusion, there are many reasons why organisational alignment delivers business value – the organisation presents its core messages more consistently, there is greater employee engagement, leaders are more credible, the organisation has greater efficiency, it is less wasteful, there are less risky processes and it is more agile.

 

References:
1. Thomas C Powell 1992 Organizational alignment as competitive advantage.  Strategic Management Journal 13: 119-134 http://www.thomaspowell.co.uk/article_pdfs/Org_alignment_as_CA.pdf

2. SAP SuccessFactors 2006 How Smart Human Capital Management Drives Financial Performance
https://www.successfactors.com/en_us/lp/articles/smart-hcm.html A more recent peer-reviewed confirmation of the business benefit of organisational alignment comes from Ali Yalya and Qing Hu 2012 The impact of IT-Business strategic alignment on firm performance in a developing country setting: exploring moderating roles of environmental uncertainty and strategic orientation.  European Journal of Information Systems 21: 373-387. pdf on ResearchGate (registration required)

3. Rajiv Sabherwal and Yolande Chan 2001 Alignment between business and IS strategies:  A study of prospectors, analyzers and defenders. Information Systems Research 12: 11-33.
http://home.business.utah.edu/actme/7410/Sabherwal%20Chan%20ISR%202001.pdf

4. Peak, D., Guynes, C.S. and Kroon, V. (2005a). Information Technology Alignment Planning – A case study, Information & Management 42:619–633. Peak, D., Guynes, C.S. and Kroon, V. (2005b). Information Technology Alignment Planning – A case study, Information & Management 42: 635–649. Paul Tallon and Alain Pinsonneault 2011, Competing Perspectives on the Link Between Strategic Information Technology Alignment and Organizational Agility: Insights from a Mediation Model. MIS Quarterly, 35: 463-486

Photo credit: Flying geese from Ana Gram / Shutterstock.com

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