Does explicitly articulating strategy improve performance?

Today’s Matrix Monday post looks at an article by Love, Priem and Lumpkin: “Explicitly articulated strategy and firm performance under alternative levels of centralisation.”

This article asks an interesting question: does the explicit articulating strategy to organizational members improve performance? It also considers whether this differs depending on the level of centralization of the organization. To a business person it seems as though clarity of communication of strategy would always be a good thing.

The article has some surprising findings:

• Strategy articulation does help in decentralised organizations; and in decentralized organizations, it is not so necessary for coordination, so it makes little difference.
• It also identifies a curvilinear relationship where very high and very low expressiveness do correlate with high performance, but moderate expressiveness is linked to lower performance. This is true for both centralized and decentralized organizations. It seems that a moderate amount of clarity on strategy may not give people sufficient information to be able to manage coordination effectively, particularly in decentralized organizations.

Previous studies have been torn between the belief that being too clear and explicit about strategy can lead to organizational inertia and a lack of initiative (the control view), and the alternative view that communication of strategy is essential to effective implementation because it provides an environment for cooperation and coordination (the coordination view). Other studies consider the articulation strategy is something which is motivation for middle managers who understand the context of the strategy as well as the need to implement it (the communication view).

This study was based on 95 US manufacturing firms which have a tendency towards centralized and mechanical instruction, so the authors speculate as to whether this would be the same in less centralized professional services and other organizations where knowledge work was more prevalent. In this case they believed that a higher level of strategy articulation will be necessary to help people coordinate more complex, less routine tasks.

What was most interesting to me was to establish clarity on why you are articulating strategy: to control, to empower people to coordinate their activity continuously, or as a way of building commitment and a sense of ownership through communication?

In today’s organizations, a certain level of control is helpful – a clear strategy can be useful in telling us when to say ‘no’.  Strategy tells us what we shouldn’t be doing as well as we should be doing. But in the large, complex, matrixed, virtual and global organizations that we (at Global integration) work with, building a sense of ownership and an understanding of strategy in the middle of the organization is essential.  “Matrix middle” managers are the people who manage the complex trade-offs and dilemmas that are normal in large businesses.

Source: Explicitly articulated strategy and firm performance under alternative levels of centralisation, by Love, Priem and Lumpkin. Journal of Management, October 2002 28:611-627.

Why not…?

Find out more about management in:
– a matrixed environment

– a global organization

– a virtual environment