Return on Assets Loss from Situational and Contingency Misfits

Abstract

We develop a rule-based contingency misfit model and related hypotheses to test empirically the Burton and Obel (1998) multi contingency model for strategic organizational design. The model is a set of "if-then" misfit rules, in which misfits lead to a loss in performance; they are complements to the strategy and organizational contingency theory fit rules. Using data from 224 small- and medium-sized Danish firms, misfits are categorized and identified. Then, performance hypotheses are developed and tested using regression models. We confirm the hypotheses that firms with situational misfits or contingency misfits, or both, incur performance losses in return on assets compared with firms with no misfits. Contrary to our hypotheses, we did not find that additional misfits lead to increased performance loss. Our results suggest that just one misfit of any kind may significantly compromise performance. These results yield a deeper understanding of organizational contingency theory, as well as implications for the rule-based fit-misfit organizational design model.Misfit, Contingency Theory, Organizational Design, Complexity Theory, Strategy Implementation

Configuring quality management and marketing implementation and the performance implications for industrial marketers

“…Indeed, design of organizational configurations for implementing management practices has long been a popular research topic (e.g., Short, Panye, & Ketchen, 2008;Wong, Lai, & Cheng, 2009). From the contingency perspective, Burton, Lauridsen, & Obel (2002) develop and empirically test a multicontingency model for strategic organizational design. Their study results highlight the importance of the configuration issue to performance success.…”

Combining Theoretical Perspectives on the Organizational Structure-Performance Relationship

“…The inclusion of network concepts and methods may also have benefits for the information processing perspective's understanding of design misfits (i.e., the mismatch between the actual design and the one that is prescribed by its many determinants) (Burton & Obel, 2004). For example, in a sample of 252 Danish firms, Burton, Lauridsen, & Obel (2002) found the existence, though not the number, of a broad range of contingency and situational misfits to be associated with lower return on assets. In a similarly constructed sample, Håkonsson et al (2012) examined the performance consequences of a specific subset of misfits -those between organizational climate and leadership style -and found them to be associated with lower ROA than corresponding fits.…”

Misfits in Organization Design: Information Processing as a Compensatory Mechanism

“…It is possible that one of those structural variables over-fits the contingency factor while another under-fits the same contingency factor. Second, a structural variable may have a misfit to more than one contingency variable simultaneously (Burton et al, 2002(Burton et al, , 2003Donaldson, 2001;Gresov, 1989Gresov, , 1990. For example, formalization can misfit uncertainty and size.…”

“…Contingencies are viewed as the information-processing requirement, while organization structure is viewed as the information-processing capacity to meet that requirement (Burton, Lauridsen, & Obel, 2002Egelhoff, 1991;Keller, 1994;Tushman & Nadler, 1978). When information-processing capacity matches the information-processing requirement, there is a fit.…”