Exploring the Dimensions of Organizational Performance

Abstract

Organizational performance is a fundamental construct in strategic management. Recently, researchers proposed a framework for organizational performance that includes three dimensions: accounting returns, growth, and stock market performance. We test the construct validity of indicators of these dimensions by examining reliability, convergent validity, discriminant validity, and nomological validity. We conduct a confirmatory factor analysis with 19 analytically derived indicators on a sample of 37,262 firm-years for 4,868 listed U.S. organizations from 1990 to 2010. Our results provide evidence of four, rather than three, organizational performance dimensions. Stock market performance and growth are confirmed as separate dimensions, whereas accounting returns must be decomposed into profitability and liquidity dimensions. Robustness analyses indicate stability of our inferences for three dissimilar industries and for a period of 21 years but reveal that organizational performance dimensions underlie dynamics during years in which environmental instability is high. Our study provides an initial contribution to the clarification of the important organizational performance construct by defining four dimensions and validating indicators for each dimension. Thus, we provide essential groundwork for the measurement of organizational performance in future empirical studies.

Management Practices as Capabilities Leading to Superior Performance

“…We refer to firm performance as a subset of organizational effectiveness that covers operational and financial outcomes (Santos & Brito, 2012;Venkatraman & Ramanujam, 1986). Organizational effectiveness is a fundamental construct in strategic management (Hamann, Schiemann, Bellora, & Guenther, 2013). Organizational effectiveness captures organizational performance and beyond, also measuring other internal performance outcomes related to efficient or effective measures such as productivity, and other external measures that enable a more comprehensive evaluation beyond the economic, such as corporate social responsibility (Richard, Devinney, Yip, & Johnson, 2009).…”

“…Profitability is defined as a firm's efficiency in utilizing production factors to generate earnings (Hamann et al, 2013). Revenue growth is defined as a change in the firm's revenue from goods sold over the period (Richard et al, 2009).…”

Impact of financial crisis on ROA differences among industries of the Czech economy

“…Často citovaní Richard et al (2009) poukazují na celou řadu úskalí jednodimenzionálního měření výkonnosti. Demonstrují to Hamann et al (2013), kteří nalezli hned čtyři dimenze výkonnosti, z nichž ziskovost představuje vedle neanalyzované likvidity pouze jednu ze dvou…”

The Link between Corporate Environmental and Corporate Financial Performance—Viewpoints from Practice and Research

“…The choice of different measures is justified by the multidimensional nature of the constructs CEP [36] and CFP [4]. The CFP construct is used to assess the outcomes of business strategy [3] and a primary, fundamental indicator for organizational performance and long-term survival of an organization [4].…”

“…CEP refers to the "measurable results of an organization's management of its environmental aspects" [2] (p. 8). The CFP construct is used to assess the outcomes of business strategy [3] and is a primary, fundamental indicator for organizational performance and long-term survival of an organization [4]. The diverse range of studies which analyze the link between CEP and CFP covers various measures, data, theories, methods, directions of causality, as well as plant, industry, and country specific contexts.…”