Abstract

Organizational Development (OD) is the strategic and systematic approach to enhancing an organization’s effectiveness and viability. OD is about cultivating a culture of continuous improvement and innovation, ensuring the organization remains resilient and responsive in an ever-evolving landscape. This is especially critical in the fast-moving consumer goods (FMCG) industry where competitive advantage can swiftly be disrupted by competition; therefore, successful OD initiatives must take a holistic view in addressing structural or procedural issues—plus the human aspects of organizations. In the current fast-paced and uncertain business environment, organizations must be agile and adaptable to thrive. Furthermore, OD emphasizes the importance of employee development and engagement because people are the lifeblood of any organization, and their skills, motivation, and commitment are critical for success. Through initiatives such as training and development programs, performance management systems, and employee well-being initiatives, OD fosters a supportive and inclusive work environment where individuals can thrive and contribute their best. Therefore, OD lays the foundation for collaboration, innovation, and high performance. In this study, OD includes employee education and experience as well as organizational structure, hence, the purpose of this study was to investigate the impact of OD on the understanding of business strategy within the organization. An empirical study conducted in the FMCG industry produced a sample size of 131 respondents. The main findings and recommendations to management, as presented in the study, suggest that OD has an impact on the understanding of business strategy within the organization.

Keywords:Business Strategy; Organizational Development; Employee Education; Employee Experience; Organizational Structure

Introduction

Numerous organizations in different sectors of the economy are increasingly recognizing the need for introducing organizational development (OD) initiatives in their enterprises to improve their functioning [1]. The key to any organization’s sustained performance is not found in the singular contribution of any of the various processes in the organization, but rather in their alignment and interaction within the overall system [2]. Therefore, a high degree of integration between the various processes in an organization is a prerequisite for the successful functioning of an organization. Al‐adaileh et al. [3] believe that for organisations to flourish whilst facing the fast, ever-changing business environment, they must amend their current processes and procedures, thereby enabling them to fast-track the changes effectively. This could, therefore, imply that where there is a mismatch between the overall organizational strategy and the organizational structure, it would be difficult for the main business strategy to be understood throughout the structural levels of the organization. Hence, Marx [4] argues that the organizational structure must be aligned with the business’s strategy to provide the coordination and control needed to implement it effectively.

The purpose of this study is to evaluate the factors that affect the understanding of business strategy within the organization. Marx [4] argues that the right organizational structure is a prerequisite for performance. In most organizations, however, there are different interpretations of business strategy by employees at different levels of the organizational structure. This means that employees do not seem to understand, or interpret, business strategy the same way. The study identified employee education and experience, as well as the structure of the organization, as key factors of OD, that influence the understanding of business strategy within an organization.

Problem Investigated

Poor execution of strategies is often caused by the employee’s misunderstanding of business strategy at different levels of the organization [5]. Misalignment of business strategy, structure and human resources, can cause an organization to miss achieving tangible goals and objectives [6]. Therefore, if strategy is understood the same way in all different levels of the organisation, it would enable the organization to perform better. However, if, as Alsudiri et al. [6] argues, there is a misalignment between the strategy and organisational structure, it will affect the assimilation of strategy through the different levels of the organizations. In most cases, the higher you go up within the organogram, the more the strategy is understood and the lower you go, the lesser it is understood.

Business strategy needs to be clearly understood at all levels of the organization [6]. When the alignment is strong, the planning and the execution team gain encouragement, and the energy runs high across the different levels [7]. The existing literature barely bring a framework to facilitate a better understanding of business strategy through different levels of the organization [8], which then creates a platform for investigation. This led to the following main research question to be addressed in this study: How does OD affect the understanding of business strategy within an organization?

Research Objectives

Considering the aforementioned main research question and the study’s focus, the primary and secondary objectives are outlined in the following sections.

Primary Objective

The primary objective of this study is to investigate the impact of OD on the understanding of business strategy within the organization.

Secondary Objectives

In order to achieve the primary objective of this study, the following secondary research objectives are identified:
i. To provide a comprehensive literature overview regarding OD and business strategy.
ii. To establish a connection between OD and the understanding of business strategy.
iii. To provide an empirical investigation to establish the relationship between OD and the understanding of the business strategy.

Literature Review

Since this study is focusing on the impact of OD on the understanding of business strategy within an organization, the following sub-sections elaborate on these concepts.

Organizational development

Organizational development can be defined as a planned process of introducing change in an organization’s culture using behavioral science technology, theory and research [1], enhancing an organization’s effectiveness and viability having humans at its core. According to Cummings and Worley [9], OD is the organization-wide application of behavioral science knowledge to the planned improvement, and reinforcement of the strategies, structures, and processes that lead to organization effectiveness. However, Chowdhury and Chowdhury [10], define OD as a systemic discipline that brings together diverse functions in an organization within the consideration set of external factors, to design, implement and sustain business-focused interventions with people at its center. It is therefore a generic term used to describe various interventions strategies employed by organizations with the objective of increasing the capability of individuals and teams [11]. In an OD setting, organizations are represented by people who interact with one another because they have common cause through a common understanding and materiality of tokens [12]. OD must therefore be centered on the continual enhancement of knowledge capabilities, as the foundation of organizational effectiveness [13]. As such OD can be implemented in business by adapting efficient leadership approach, managing employee performance and designing a clear work process [14]. Hence, OD initiatives are heavy on both strategy crafting and implementation [10].

Since OD is a crucial part of the sustainability and growth of a business [14], it is important to understand that information and knowledge capabilities are the source of competitiveness, and the heart of OD and strategy, organizations must therefore focus on developing these dynamic capabilities [13] for the growth and survival of the business. It is for these reasons that OD initiatives such as employee education, employee experience and organizational structure are necessary building blocks into the understanding of business strategy.

Employee education

Literature review reveals that there are scant studies offering firm-level evidence that provide a link between education and the understanding of business strategy. The literature review, however, indicates that more educated workers are also more productive, not difficult to train, and can learn to adapt to different strategies easily [15]. Organizations in the industrialized countries emphasizes the importance of education by continuously educating their employees and keep them in their organization [16,17]. Organizations who fail to educate and train their employees will be threatening their future competitive advantage [16]. As the global market demands that organizations should continuously improve their state of technology, their business growth models, and their market strategies, the workforce up-skilling should also be a constant and continuous process as it will assist in employees in gaining a better understanding of different business strategies [18].

Studies show that employees with less education participate less in training programs than those with higher education levels [19], therefore subjecting themselves to the risk of having their present skills becoming obsolete [20], thereby increasing their risk of both economic and social marginalization in new projects that organizations might pursue [16]. They also subject themselves to an even bigger risk of having themselves excluded as they lack important skills and critical knowledge required to stay long within the organization and to understand the new and different strategies [21]. Apart from the challenge of not being able to interpret and solve complicated problems, workers with low levels of education lack flexibility in managing change [22,23].

Saini et al. [24] recommend that recruiting new educated staff and providing them with training and incentives is important in making sure that the envisioned strategy is accomplished. Consequently, an organization that is not keen on investing in the development of their workforce through education, might battle to achieve its strategic objectives in the long run, because less educated workers tend to struggle to understand the strategic direction the company is taking [25]. As the world is strongly affected by globalization, organizations also require employees with high levels of self-efficacy, which is described as the belief in one’s capabilities to cope with a range of challenging demands, in a variety of contexts [26]. Therefore, employee level of education and its impact cannot be ignored when discussing the factors that affect the understanding of strategies [27]. Against this background, the following is hypothesised: H¹: There exists a relationship between the level of employee education and the understanding of business strategy.

Employee experience

One of the most important and interesting factors to have an impact on the understanding of business strategy is the employee experience [28]. Some of the business strategies might bring unfamiliar problems or scenarios that employees might not have dealt with before, thereby creating a challenge for employees who have been in similar roles, or with the same organization for many years [29]. When certain employees are fit for the current roles, in the present working atmosphere, they might have already accumulated the required set of skills and knowledge and will tend to prefer to refer back to what they know, whereas to solve a new problem brought by a change in the business strategy, might require different solutions [30].

Employees with long-term service might use their past experience to resist change, even when it is important for them to embrace the change [15]. If the organization does not focus on developing leadership abilities and human resource competence, committing the best talents, and supporting employees and management changes, some employees may perceive top management’s strategic moves as a threat to their job security [31]. Experienced employees are always monitoring whether the key players, procedures, and resources are fully integrated into the business strategy; if not, they will typically be hesitant to cooperate [30]. Hence, business strategy that require major changes in the organizational structure can be resisted by many employees [32], as they might find it difficult to understand the purpose behind certain changes [15]. For instance, in South Africa where the labor force is highly unionized, it would take even longer to effect major changes in the business strategy as the unions might just be focused on protecting the job security, especially those of the aging workforce with obsolete skills [33].

According to Srivastava and Sushil [7], employees are all on different journeys with their employers, so the experiences they encounter throughout their journey could influence their attitude and behavior towards their performance, which subsequently affects the success of the employer business strategy. For example, Angeline [34] discusses the expectations, work attitudes and behaviors of individuals from the generational group (i.e. Generation X versus Generation Y) and cautions that they may be influenced by their significant life events, culture, work environment, remuneration package, and career advancement opportunities, differently. For the management, it is essential to observe and develop preventive measures against any discrepancies that could appear between the expectations and perceptions of employees from different generational groups as this might work against the business strategy [34,35]. Against this background, the following is hypothesized: H²: There exists a relationship between the level of employee experience and the understanding of business strategy.

Organizational structure

Organizational structure deals with how critical activities such as task allocation, coordination and supervision are directed toward the achievement of organizational aims [36]. It is the process by which the organization’s roles, responsibilities, and strategic vision are coordinated, as well as the way tasks are assigned so that the organization’s objectives can be achieved [37,38]. Organizational structure is always aimed at facilitating the implementation of the firm’s business and leadership strategies [39]. From the perspective of Jacobides [40], organizational structure can also be considered as the viewing glass, or perspective, through which individuals see their organization and its environment. Organizations need to be efficient, flexible, innovative and caring to achieve a sustainable competitive advantage, and the structure is one of the ways to achieve this [41].

According to Hanson et al. [42], management must decide whether to centralize or decentralize decision making, which refers to the degree to which decision making is concentrated at the upper level of management, with decentralization involving the dispersion of such authority throughout the lower levels of the organization. Centralization weakens the leader’s ability to exercise their positive leadership behaviors, such as fostering trust within the team, which, in turn, impacts employee behavior and outcomes [43]. Centralized organizations reduce the autonomy of employees and concentrate authority in one central point of the organization where business strategy is crafted [44]. In centralized environments, employees tend to view business strategy as just the business of top management, and often lack the appetite to understand it [45]. As such, centralization distances decision-makers from the employees, thereby compromising the link between learning and action resulting in misalignment when management communicates the business strategy [5].

One of the key elements of organizational structure is the level of formalization [46], which refers to the level of standardization and extent to which employee behavior is governed by rules and policies [47]. Where there is higher degree of formalization, a change in business strategy becomes hard to communicate due to lack of interest and low flexibility from employees, resulting in poor understanding of the strategy [17]. The influence of the leader in terms of empowering his/her employees is low in a highly formalized organization, as formalized policies and procedures, such as rules and job descriptions, create behavioural and process controls that regulate employee actions, limiting the scope for empowerment, and therefore reducing the leader’s ability to enhance and influence the understanding of business strategy and performance [46].

Another element of structure which can influence understanding of business strategy and its implementation, is process-focused organization where the understanding of all business strategy rests in management, ensuring that the structure and internal processes correlate as envisaged in the organization’s strategic plan document [47]. In such an organization, the quality of outputs produced are determined by the manner in which processes are performed, and further helps the decisions on the outcomes achieved, and also affects the understanding of business strategy and its implementation [48]. Therefore, all the structural elements, such as rules, regulations, organization hierarchy, communication and processes are important to ensure that the strategy deployment is carried out effectively within the organization [4,5,44]. While managers are the drivers of the strategy, its planning, execution and monitoring, it is the organization structure that has strong potential to affect almost all managerial decisions and actions, therefore, it is critical to properly align strategy and structure [7]. Against this background, the following is hypothesized: H³: There exists a relationship between organizational structure and the understanding of business strategy.

The business strategy

Business strategy is a complex concept that requires many different processes and activities within an organization. It involves goals and objectives that an organization needs to achieve to be successful in the marketplace [49]. Hunger and Wheelen [50] define the company’s business strategy as a comprehensive and advanced plan which details how the company is planning to achieve its vision, mission and objectives. Through the business strategy, the company has to maximize its competitive advantage, while it is also minimizing its weaknesses against the competition. Hough et al. [2] make mention of how a company’s business strategy should consist of all competitive decisions, tactics, approaches and processes to be followed by management and employees to grow the company, whilst attracting and pleasing customers, old and new, to successfully compete and conduct efficient operations above the targeted levels of organizational performance. From the three definitions, it can be ascertained that the business strategy is a management tool, or a plan, to help assist any company to achieve its objectives, using its resources whilst satisfying the needs of relevant stakeholders.

To get the best value from an organization, managers must pursue business strategies that enhance the overall results of the organization as well as increase the rate of profit growth over time [51]. Thus, the process of compiling and managing the business strategy must be focused on addressing factors that influence a firm’s long-term prospects, such as survival, growth, and profitability [52]. From the perspective of Parakhina et al. [53], distinctive features of business strategy include a quick and flexible response to the surrounding environment, as well as adapting the strategy to adjust directions and functions and the structure of the organization to achieve the desired level of efficiency and quality for the company. General strategic theory has key components such as target formation, analysis of business strategy, development, implementation, controlling, and managing changes in business strategy [54]. Each of the competitive and dynamic environments can create significant milestones for directors, senior executives, and strategic planning teams who face the challenge of developing the strategy for the organization regarding future direction, scope, and the strategy required to deliver on corporate objectives [55]. Therefore, understanding business strategy across the organization is not only important; it is central to business competitiveness, growth, and survival.

Research Methodology

The current study is based on the quantitative technique, which is underpinned by the positivist paradigm, and performed a statistical relationship between the dependent variable, and the independent variables, identified from the literature review. The population of this study were employees and managers, of the fast-moving consumer goods (FMCG) multinational companies in South Africa, and a sample of 131 respondents were received from this population. The study used non-probability sampling, particularly convenience sampling and the questionnaire to capture data which was distributed both by email and by hand to the respondents. The study also distributed the questionnaire via the website www.surveymonkey.com, which enabled the researcher to access the target respondents.

The questionnaire for the study was designed using a five-point Likert Scale, ranging from strongly disagree, to strongly agree. The data was analyzed using the STATISTICA-10 computer software program. The empirical results were analyzed and tested for both reliability and validity. The Pearson correlation analysis assesses the degree of relationship between linearly related variables. The observed small p values and statistical significance indicate that the variables under investigation are correlated, and using 95% confidence interval, a level of significance lower than 0.05 was required. It was determined how the independent variables, Employee education (ED), employee experience (EE) and Organizational structure (OS) influence the dependent variable, Understanding of business strategy (BS). The correlation values below 0.4 reflect low correlation; from 0.4 to 0.6 reflect moderate correlation, and greater than 0.6 reflects high correlation.

Empirical results

Understanding of business strategy

Seven distinct characteristics were used to measure the level of understanding of the business strategy. The results indicate that respondents have a fair understanding of the business strategy. However, between 20% and 40% of the respondents indicated neutral on most items, as shown in Table 1. The results in Table 2 show that respondents have a fairly reasonable understanding of their organization’s business strategy, based on the mean value, BS (2.884).

Employee Education

Eight distinct characteristics (ED1 through ED8) were utilized to ascertain the effect of education on the understanding of business strategy, as shown in Table 3. Employee education has a fairly weak positive relationship with understanding of business strategy, as shown by their correlation of 0.382 (Table 4). However, it is clear from the insignificant p-value of less than 0.05, that employee education does, have an impact on the understanding of business strategy.

Employee experience

Six distinct characteristics (EE1 through EE6) were utilized to ascertain the effect of employee experience on the understanding of business strategy, as shown in Table 5. Employee experience has a fairly strong positive relationship with understanding of business strategy, as shown by their correlation of 0.513 (Table 6). It is also clear from the insignificant p-value of less than 0.05, that employee experience does, have an impact on the understanding of business strategy.

Organizational structure

Eight distinct characteristics (OS1 through OS8) were utilized to ascertain the effect of organizational structure on the understanding of business strategy, as shown in Table 7. Organizational structure also has a fairly weak positive relationship with understanding of business strategy, as shown by their correlation of 0.357 (Table 8). However, it is clear from the insignificant p-value of less than 0.05, that organizational structure does, have an impact on the understanding of business strategy.

Statistically significant relationships

(Figure 1)

Discussion and Managerial Implications

Organizational Development (OD) is about cultivating a culture of continuous improvement and innovation, ensuring that the organization remains resilient and responsive in an ever-evolving landscape, especially in the FMCG industry where competitive advantage can swiftly be disrupted by competition. Therefore, organizations in the FMCG industry need to introduce organizational development initiatives in their enterprises to improve their functioning. Such initiatives should include restructuring of the organizational structure in such a way that employees have opportunities to upgrade their education qualifications as well as appreciate and reward experienced employees for their contribution to the success of the organization. This is important because, as shown in this study, information and knowledge capabilities are the source of competitiveness, and the heart of OD and business strategy. Therefore, understanding business strategy across the organization is important and the core of the business competitiveness, growth and survival.

Conclusion

The competitive nature of the FMCG industry requires OD to lay the foundation for collaboration, innovation, and high performance. Such a competitive nature entails understanding of business strategy by employees at all levels of the organizational structure so that they can interpret and execute business strategy in the same manner.

From an economic perspective, this study highlights that the long-term sustainability of the FMCG industry requires management to be innovative and creative in building an inclusive organizational structure that will enable them to encourage everyone in the organization to understand business strategy. It is therefore envisaged that the study will assist organizations to understand the current trends of OD in the digital age so that they can gain competitive advantage in dynamic environments that are characterized by rapid advancement of technology, evolving preferences of customers, and volatile market conditions.

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