Management Accounting Section Midyear Meeting

Performance Effects of Strategic Alignment and Clarity

• In Event: Performance Measurement III

Abstract

The alignment of a firm’s performance measurement system with its strategic objectives is fundamental to strategic management control, at least in part because performance measures and stated strategy represent separate sources of information that workers can rely on to guide their efforts. In this study, we experimentally examine the effects of strategic alignment and strategic clarity (i.e., the specificity of the firm’s stated strategic objectives) on workers’ performance on a multidimensional production task. We find a significant disordinal interaction of strategic alignment and clarity on worker performance – strategic alignment improves performance under a vague strategy statement but impairs performance under a clear strategy statement. Strategic clarity with an aligned performance measure increases the conflict workers feel between different performance dimensions, leading to a focus on accuracy over volume and resulting in lower overall performance. Our results provide evidence that strategic clarity can overcome the negative performance effects of misalignment, and that alignment can overcome the negative effects of strategic ambiguity.

Authors

• Steven D. Smith, Brigham Young University

• Tyler F Thomas, University of Wisconsin-Madison