Contribution to Research 70

This  research  makes  contributions  in  the  area  strategic  performance  measurement   in  turbulent  environments  as  well  as  in  the  area  of  integration  of  existing  theoretical   views  on  cybernetics  and  information  processing  with  strategic  performance  

measurement.    These  will  be  explained  in  the  following  subsections.  

1.6.1.1.  Turbulent  Environments  

There  are  very  few  studies  of  strategic  performance  measurement  pertaining  to   turbulent  environments  (Hoque,  2004;  Bisbe  and  Malagueno,  2012).    Researchers   have  been  asking  that  studies  be  conducted  which  shed  light  on  how  performance   measurement  systems  can  be  designed  to  accommodate  changes  in  business   priorities  (Bititci  et  al.,  2000)  as  well  as  promote  greater  flexibility  and  dynamism   (Franco-­‐Santos  et  al.,  2012).    This  research  closes  part  of  this  gap,  particularly  on  

MANAGEMENT' AIMS'' PERFORMANCE' OBJECTIVES' UNCERTAINTY'' AREAS' DECISION'

DATA' MANAGEMENT'ATTENTION'

PERFORMANCE'MEASURES' Measures'to'Assess' Mission'and'Vision' Measures'to'Monitor' Uncertain1es' Measures'to'Manage' Performance' Measures'to'Make' Decisions' 1' 2' 3' 4' 5' 6' •  What%is%the%vision%for%the%organiza0on?% •  What%is%the%mission?% •  What%is%a%succinct%summary%of%the% strategy?% •  Where%will%the%firm%be%posi0oned%over% the%short%and%longer<term?% •  What%are%the%firm’s%financial%priori0es?% •  What%are%the%new%product%or%market%goals?% •  What%must%be%accomplished%vis<à<vis% customers?% •  What%are%the%most%pressing%process% improvement%ac0vi0es?% •  What%are%the%workforce%goals?% •  What%do%other%stakeholders%need?% •  What%forces%are% driving%the%most% significant%change%in% the%industry?% •  What%forces%pose%the% most%significant%threat% to%our%aims%and% objec0ves?% •  What%events%have%the% highest%likelihood%of% occurring%coupled%with% the%most%severe% impact%if%they%do?% •  What%are%the%major% strategic%decisions% facing%the%firm%now?% •  What%data%are%cri0cal% to%future%performance% that%is%needed%but%not% possessed?% •  What%do%top%leaders% need%to%know%that% they%do%not?% •  How%much%of%0me%is%the%top%team% spending%within%each%element?% •  How%much%0me%should%be%%%%%%% spent%in%each?% •  What%change%in%aBen0on%%%%%%%%%% would%have%the%%%%%%%%%%%%%%%%%%%%%%%% greatest%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%% benefit?% New%Element% in%Model%

Edward  A.  Barrows,  Jr.  –  Cranfield  University  –  School  of  Management  –  DBA  Thesis   How  Firms  in  Turbulent  Environments  Measure  Strategic  Performance  

71  

how  dynamism  can  be  embedded  into  the  strategic  performance  measurement   system  itself  (Kolehmainen,  2010)  and  how  organizational  paralysis  and  inertia   caused  by  the  system  can  be  overcome  (Micheli  and  Manzoni,  2010)  in  the  turbulent   environment  context.        

The  figure  shown  in  Figure  1-­‐7  depicts  an  element  of  the  model  focused  on   uncertainty  areas.    As  this  research  indicates  from  both  the  security  software  and   health  care  industries,  uncertainty  is  a  major  aspect  of  attention  and  a  key  driver  of   performance  in  turbulent  settings.    Drawing  on  the  concept  of  semi-­‐structures   (Brown  and  Eisenhardt,  1997)  as  well  as  performance  measures  oriented  on  

uncertainty  (Simons,  1995),  managers  monitor  developments  rising  from  uncertainty   areas  so  as  to  better  equip  their  firms  to  navigate  turbulent  environments.    While   uncertainty  and  turbulence  is  recognized  as  a  challenge  to  strategy  and  performance   (Eisenhardt  and  Sull,  2001;  Sull  and  Eisenhardt,  2012),  it  has  not  until  now  been   incorporated  formally  in  a  strategic  performance  measurement  framework  itself.     Scholars  have  established  the  relationship  between  the  external  environment,  firm   fit,  and  performance  (Wernerfelt,  1984;  Teece  et  al,  1997).    It  is  recognized  too  that   in  order  to  maintain  performance,  firms  must  adjust  their  fit  to  the  environment  as  it   changes  and  that  “practitioners  should  recognize  the  importance  of  industrial  and   environmental  factors”  (Lo,  2013,  p.  217).    While  studies  have  been  conducted  to  aid   in  understanding  how  non-­‐financial  performance  measures  moderate  the  

relationship  between  uncertainty  and  performance,  findings  have  not  shown  a   positive  relationship  (Hoque,  2012).    This  study  finds  that  the  relationship  between  

the  firm  and  its  environment  is  achieved  through  use  of  multiple  mechanisms   which  include  performance  measures,  strategic  objectives,  decision  studies,  and   semi-­‐structures  all  of  which  enable  top  managers  to  focus  their  attention  on   critical  uncertainties  thereby  gathering  the  information  needed  to  maintain  the  fit   between  the  firm  and  its  environment.    This  focus  on  uncertainty  coupled  with  the   integrated  use  of  multiple  mechanism  embedded  into  the  structure  of  the  strategic   performance  measurement  system  was  not  known  before  this  research  and  is  a   specific  result  of  it.    

1.6.1.2.    Theoretical  Integration  

The  model  in  Figure  1-­‐7  accommodates  managers’  need  to  search  out  additional   information  in  their  effort  to  counteract  uncertainties  caused  by  environmental   turbulence.    Further,  the  model  acknowledges  the  view  that  mangers  have  limited  

Edward  A.  Barrows,  Jr.  –  Cranfield  University  –  School  of  Management  –  DBA  Thesis   How  Firms  in  Turbulent  Environments  Measure  Strategic  Performance  

72  

attention  and  must  make  trade-­‐offs  regarding  how  to  best  focus  their  strategic   performance  efforts.      

As  discussed  in  section  1.5.1.3,  as  turbulence  levels  grow  and  uncertainty  increases,   managers  will  increase  their  efforts  to  locate  information  that  is  not  possessed  by   the  organization  for  purposes  of  improving  its  decision-­‐making  capacity  (Galbraith,   1973).    The  study  found  that  managers  rely  upon  their  strategic  performance   measurement  system  to  provide  information  pertaining  to  how  well  they  are   meeting  existing  performance  objectives,  but  they  expressly  seek  external  

information  on  occasions  where  they  are  making  strategic  decisions.    Managers  also   establish  semi-­‐structures  (Brown  and  Eisenhardt,  1997)  within  their  strategic  

performance  measurement  systems  as  means  interact  with  areas  that  are  causing   uncertainty  and  turbulence.    Existing  strategic  performance  measurement  literature   indicates  much  of  strategic  performance  measurement  is  based  upon  closed  loop   feedback  systems  (Kaplan  and  Norton,  2000b)  and  forms  of  diagnostic  control   (Simons  1995).    With  the  addition  of  the  uncertainty  areas  and  the  decision  data   element,  managers  have  a  mechanism  to  incorporate  feedfoward  control  in  addition   to  feedback  control  within  the  same  model.    Thus,  this  research  confirms  existing  

theory  which  claims  that  both  diagnostic  and  interactive  control  are  aspects  of  a   strategic  performance  measurement  system  and  that  a  single  framework  like  the   Balanced  Scorecard  can  be  used  as  a  means  to  guide  both  diagnostic  and  

interactive  control  (Tuomela,  2005).    It  also  refines  and  extends  theory  in  the  area   of  management.    While  Simons’s  Levers  of  Control  (1995)  framework  incorporates   uncertainties,  he  notes  that  uncertainties  are  monitored  through  existing  

performance  measurement  and  management  structures.    This  research  found  that   performance  measures  which  were  part  of  an  existing  strategic  performance   measurement  system  did  inform  managers  regarding  critical  uncertainties;   managers,  however,  also  received  valuable  information  from  semi-­‐structures   embedded  into  the  strategic  performance  measurement  system  (Brown  and   Eisenhardt,  1997).    Further,  the  use  of  these  semi-­‐structures  such  as  strategic   alliances  and  integrated  sales/engineering  teams  enable  firms  to  effectively  probe   into  and  monitor  uncertainty  areas  as  a  component  of  the  strategic  performance   measurement  system.    Finally,  within  the  single  model,  both  feedforward  and   feedback  control  can  be  facilitated.    This  extension  of  the  management  control   theory  and  cybernetics  through  integration  with  the  concept  of  semi-­‐structures   was  not  known  before  this  research  and  is  another  specific  result  of  it.    

Edward  A.  Barrows,  Jr.  –  Cranfield  University  –  School  of  Management  –  DBA  Thesis   How  Firms  in  Turbulent  Environments  Measure  Strategic  Performance  

73