Performance feedback and middle managers’ divergent strategic behavior: The roles of social comparisons and organizational identification

Abstract

Research Summary: What drives middle managers to search for new strategic initiatives and champion them to top management? This behavior-labeled divergent strategic behavior-spawns emergent strategies and thereby provides one of the essential ingredients of strategic renewal. We conceptualize divergent strategic behavior as a response to performance feedback. Data from 123 senior middle managers overseeing 21 multi-country organizations (MCOs) of a Fortune 500 firm point to social performance comparisons rather than historical comparisons in driving divergent strategic behavior. Moreover, managers' organizational identification affects whether they attend to organizational-or individual-level feedback. These results contribute to research on performance aspirations and strategy process by providing a multilevel, multidimensional framework of performance aspirations in middle management driven strategic renewal. Managerial Summary: Middle managers are essential actors in strategic renewal. Their unique positions offer insights into operations alongside knowledge of strategy. In contrast to typical assessments of managerial performance with reference to a prior year, this research shows that performance comparisons relative to peers and other organizational units better motivate managers' divergent strategic behavior. Our results also show that managers who identify with the firm are more attentive to organizational rather than individual performance discrepancies. Thus, our study unveils an important approach for organizations aiming to spark strategic renewal.

Deviations from aspirational target levels and environmental and safety performance: Implications for operations managers acting irresponsibly

“…The weakest (but still significant effect) is for above historical aspirations, and above social aspirations is the strongest effect. That the effects of deviations from social performance are stronger is in line with the previous literature (e.g., Tarakci et al, ) and our initial model in Figure . However, the literature suggested the effects would be strongest for below aspirational performance and weakest for above historical aspirations (e.g., Baum et al, ).…”

“…These findings are generally in line with previous research using the BTF at the firm level of analysis to explore risky behavior, specifically in terms of financial decision‐making (Harris & Bromiley, ; Mishina et al, ; Tarakci et al, ). EHS breaches emanate from the operations function and the findings indicate that when a firm's operations managers are faced with deviations from aspirational performance, they, like other managers, will be more likely to engage in irresponsible behavior as the distance from the aspiration grows.…”

“…We propose that our results do not support the loss aversion explanation for how firms performing above aspirations would frame the choice to breach EHS regulations. Instead the results are most consistent with the suggestion that hubris is the process underpinning the choice to breach when doing well (e.g., Tarakci et al, ). We reach this conclusion based on the following.…”

“…Behavioral theories suggest that individuals (e.g., Kahneman & Tversky, 1979) and firms (e.g., Cyert & March, 1963) perceive performance in relative, not absolute, terms. And there is a robust debate on how gaps between relative and actual performance impact decision-making (e.g., Tarakci et al, 2018). This research is largely framed with the BTF and PT (Kahneman & Tversky, 1979;Mishina et al, 2010;Shimizu, 2007).…”

“…While this prediction does find some empirical support (e.g., Mishina, Dykes, Block, & Pollock, 2010), there are multiple explanations for these findings. The first is that firms performing above aspirations are hubristic and believe they can get away with actions others cannot (e.g., Tarakci, Ates, Floyd, Ahn, & Wooldridge, 2018). The second is that firms performing well, especially those doing extremely well, believe that future performance is likely to decrease, and hence they take extreme measures to avoid this loss (e.g., Mishina et al, 2010).…”