Abstract
PurposeThe purpose of this paper is to analyze the relationship between organizational performance and the pattern of strategic decisions formalized in the planning of a Brazilian heavy construction company between 2006 and 2014. In this period, the company experienced a recurrent pattern of maintaining strategic decisions, despite the systematic decrease in performance and investments in the formal strategic planning (SP) and monitoring of results. The research focus is on strategic inertia and the influence of social determinants on the relationship between performance and the strategic actions negotiated in formal planning.Design/methodology/approachThis is a single-case study. The exploratory-descriptive research comprises data collection on performance and strategic decisions from the period between 2006 and 2014. The analysis was guided through documentary material and data collected from 16 interviews conducted with members of the middle to top management concerning performance, goals, and strategic initiatives. The interviewees’ statements were used to apprehend the interpreted dimension of SP expressed in the meanings attributed to this process. The analysis adopts a sociological base, and strategic inertia is the underlying phenomenon that guides this analysis.FindingsThe results show the interactive effect caused by political, cognitive, discursive, and ceremonial mechanisms obstruct the company’s strategic decisions. This case study illustrates that the conditions for the phenomenon of path dependence were created, reinforcing the strategic inertia observed in the maintenance of a reproduced pattern of strategic initiatives and goals, even though the performance was recurrently unsatisfactory. In this case, strategic inertia showed a complex relationship between the interpreted performance and strategic actions negotiated in formal planning, conditioned by mechanisms of trajectory reinforcement that interfered with the conditions for strategic change.Research limitations/implicationsStrategic inertia demonstrates a complex relationship between the interpreted performance and strategic actions negotiated in formal planning, conditioned by mechanisms of trajectory reinforcement that interfere with the conditions for strategic change. Future research on social mechanisms from the perspective of strategy-as-practice could be developed to capture the tacit components, language, power games, and other relevant categories in the social interaction of strategy development at the organizational level. In addition, future research could focus on investigating the extent to which path dependence is contingent, assuming that it is a temporary and, therefore, reversible process.Practical implicationsThis work contributes to the view of SP from the social perspective and shows that the relationship between performance and strategy has biases that can compromise performance. The work highlights implications for maintaining strategic initiative patterns, which shape a path whose function is less associated with its effects on performance and more associated with the commitment to instrumental results, due to the social nature of organizations.Social implicationsThis work deals with social mechanisms that influence strategic decisions. Since organizational performance depends on strategic decisions, the social nature of strategic inertia has causal implications to economic and social impact of organizations.Originality/valueThis work argues in favor of the influence of self-reinforcing mechanisms of path dependence in the relationship between performance and strategic decisions. The results extended the predominantly structural approach of path dependence by considering interpretive aspects related to the political, discursive, cognitive, and ceremonial dimensions of strategic inertia.
Highlights
In academic studies on strategy, performance has been used as a dependent and one-dimensional variable in theoretical-empirical research (March and Sutton, 1997; Matitz and Bulgacov, 2011)
An example is the use of the balanced scorecard (BSC), an instrument proposed by Kaplan and Norton (1997) that gained prominence due to the attention given to internal processes, clients, and learning, and knowledge dimensions
This paper dealt with the case of a company operating in the construction industry that, despite the organizational investment in formal strategic planning (SP) and monitoring of results, entered a persistent path trajectory marked by the maintenance of strategic initiatives, even though it had recurrent, unsatisfactory performance
Summary
In academic studies on strategy, performance has been used as a dependent and one-dimensional variable in theoretical-empirical research (March and Sutton, 1997; Matitz and Bulgacov, 2011). Interpreted from economic categories, performance has been considered the par excellence variable to demonstrate the impact of strategic decisions (Bromiley and Papenhausen, 2003). The instrumentality of the economic bias (see Araujo et al, 2012; Félix et al, 2016) has been combined with other evaluative factors, widening the complexity of the ways of measuring organizational impacts and the results management The complexity of the ways of understanding performance is associated with criticism that the focuses on instrumental rationality are myopic, when centered on the economic dimension (Ruef, 2003). This research analyzes the relationship between the evolution of organizational performance and the pattern of strategic business decisions formalized in the SP of a Brazilian heavy construction company from 2006 to 2014
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