Two critical components of the firm’s structural context are the level of autonomy that organizational units enjoy in their decision making and the extent to which performance attributions of the units’ decisions are interconnected within the firm. The enactments of these features constitute, respectively, the level of decision autonomy and shared and participatory management. Decision autonomy refers to the extent to which decision making is decentralized such that individual units perceive that they have control over their impact on organizational outcomes (Takeuchi et al., 2008).
Shared and participatory management is the extent to which units’ rewards depend on one another’s performance (Xie et al., 2003). These two features thus echo two critical aspects of intra-organizational functioning:
- decision autonomy determines how organizational units independently provide input into decision-making processes (Yukl and Fu, 1999; Takeuchi et al., 2008),
- shared and participatory managementy conveys the lack of such independence when it comes to evaluations of the units’ collective output (Wageman, 1995; Xie et al., 2003).
Thus, the two structural arrangements together provide a comprehensive picture of the level of integration among different organizational units, covering both the inputs and the outputs of decision making. Decision autonomy and shared and participatory management exert opposing influences on the performance outcomes of a firm’s alignment and adaptability ambitions, which enables us to highlight critical challenges inherent to the simultaneous pursuit of these ambitions.
Shared and participatory management instead is enacted through the presence of a joint reward system that evaluates organizational units according to their contribution to collective output rather their own output only (Xie et al., 2003). This concept mirrors the presence of ‘stretch’ such that organizational units are encouraged to share a common ambition associated with the overall well-being of the organization rather than prioritizing their own interests (Gibson and Birkinshaw, 2004).
The successful implementation of adaptability demands that the organization and its members enter into new and unfamiliar domains of knowledge, yet there is no a priori guarantee that such knowledge can be easily understood, absorbed, or integrated across different organizational units (Cohen and Levinthal, 1990). In some cases, centralization forces might help ensure that organizational units free the resources needed to engage in new activities or limit resistance to their implementation (Prahalad and Hamel, 1990). Specifically, granting decision autonomy can motivate organizational units to do more than is required by their narrowly defined task descriptions, and actively participate in the distribution and cross-fertilization of new knowledge across departmental boundaries, which is strongly needed for the successful implementation of adaptation. Put differently, by decentralizing decision making to organizational units, firms can enhance the performance potential inherent to adaptability because they increase the level of control that different units have to reach out to others in the organization during the development and commercialization of breakthrough technologies and radically new products.
Furthermore, decision autonomy may signal considerate treatment by top management and thus promote stronger commitment by individual units to their organization, which is particularly important for the implementation of activities that deviate from the firm’s current activity set. When organizational units have an opportunity to voice opinions about how the reconfiguration of existing activities might be best implemented and receive consideration for their initiatives and efforts, they likely feel more encouraged to ensure that their efforts contribute to the goal of turning non-incrementally new ideas into increased performance. In contrast, strongly centralized decision making (or low decision autonomy) may stifle organizational units’ willingness to go out of their way to collaborate with one another and commit to successfully implementing breakthrough ideas (Song and Dyer, 1995), which hampers the performance potential inherent to adaptability (Raisch and Birkinshaw, 2008). In all, a lack of decision autonomy may motivate organizational units to carry out only their assigned function-specific tasks, with little interest in sharing their opinions on how their own expertise might be best combined with that of other units to implement radically new activities effectively. shared and participatory management, achieved by the presence of a joint reward system, increases feelings of task and project ownership across the organization, such that different organizational units are more likely to consider how radically new ideas can be integrated effectively into the firm’s current operating domains. By emphasizing joint rather than individual rewards, top management can create buy-in among organizational units, who channel their efforts to successfully implement the firm’s overall goal to innovate radically (Hauptman and Hirji, 1999), which implies a normative, collective form of control rather than a purely utilitarian one based on individual performance. Because the reconfiguration of activities demands the integration of disparate knowledge across organizational unit boundaries (Floyd and Lane, 2000) and thus the transcendence of unit-specific interests (Collins and Smith, 2006), the success of adaptability implementation should be greater when the rewards of individual units depend on the collective performance of all units. In effect, group-based rewards enhance the successful implementation of complex, discontinuous project ideas. Furthermore, whereas individual organizational units may be myopic with regard to how the integration of knowledge across departmental borders can benefit the successful implementation of radical innovation (Hauptman and Hirji, 1999), top management likely has a better position from which to oversee and effectively reward novel ideas that require input from different organizational units. Therefore, the implementation of adaptability may be enhanced by a joint reward system that offers greater flexibility in terms of the ways available to match the implementation of complex new tasks with appropriate rewards (Gomez-Mejia and Balkin, 1989).
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