Performance Effects of Strategic Alignment and Clarity

• In Event: Motivating Multidimensional Performance

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 may 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 task. We find a significant disordinal interaction of strategic alignment and clarity on worker performance - workers under a vague strategy statement perform better with a strategically aligned performance measure, while workers under a clear strategy statement perform better with a misaligned performance measure. Strategic clarity with an aligned performance measure causes workers to focus on accuracy over efficiency, resulting in lower overall performance. Our findings provide evidence that strategic clarity can overcome the potentially negative effects of misalignment, and that alignment can overcome the potentially negative effects of strategic ambiguity.

Authors

• Steven D. Smith, Brigham Young University

• Tyler F Thomas, University of Wisconsin-Madison