Thesis
Amsterdam Business School
Middle Management Autonomy and the
Strategic Process - Does Higher Autonomy
Improve Strategic Responsiveness?
Executive Programme in Management Studies - Strategy Track
2018-08-31 Final version Tjores Maes
Student number 10499466
Statement of Originality
This document is written by Student Tjores Maes who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
Table of Contents
List of figures 3
Abstract 3
Introduction 4
Theory and Hypothesis 6
Definitions 6 Relationship 7 Research gap 8 Research question 8 Hypothesis 8 Model 14 Method 14 Population 14
Sample and data collection 15
Measuring constructs 15
Analysis approach 18
Analysis 18
Validation 18
Structural Equation Modelling 18
Correlation matrix 23
Hypothesis testing using regression analysis 24
Conclusion 27 Implications 28 Limitations 31 Discussion 32 Future research 34 Reference list 35
Appendix 1: Survey questions 38
List of figures
Figure 1: Research model 14
Figure 2: Item-total statistics for strategic responsiveness 19
Figure 3: Item-total statistics for strategic planning 21
Figure 4: Item-total statistics for autonomy 22
Figure 5: Correlation matrix for potential control variables, strategic planning, autonomy and
the four strategic responsiveness questions 23
Figure 6: Model summary for the hypothesis regarding the effect of strategic planning on
strategic responsiveness 24
Figure 7: Model with effect values and their P value 26
Figure 8: The conditional effect of strategic planning (X) on strategic responsiveness (Y) for
three given autonomies (AU_Tot) 26
Abstract
In this research we argue that organizations require more adaptive capabilities in their strategy process to deal with the increasingly dynamic environment they operate in and that the autonomy of the middle management plays a significant role herein. Based on our literary review we propose an effect on the strategic process through a moderating effect on the responsiveness of the organization to the different levels of strategic planning. We ran into complications regarding measuring constructs from literature and could not find significant effects that would support our argument. Based on our results we discuss whether interactions between middle management autonomy and the strategic process work as we expected. We detail the implications on how autonomous behaviour affects organizations and how
workings of the strategic process, issues related to the potentially non-deterministic, erratic and self-interest driven behaviour of middle managers and issues related to the
generalizability in broad populations of varying backgrounds. We discuss how the limitations of our research could provide an alternative and more compelling explanation for our results. With our research question mostly unanswered as a result, we reflect on our earlier
implications and discussion and provide direction for future research into the role of autonomy in the strategic process.
Introduction
We operate in a world where interaction between each other both in our direct environment and across the globe has been becoming easier and more frequent mostly as a result of
technological advances in communications and transportation technologies. As a result events and information are spreading faster, are more often relevant to us and we respond to them quicker. We could call this a highly dynamic environment. Similarly, most firms also operate in a highly dynamic environment and adjusting to this environment is enormously complex (Miles, Snow, Meyer & Coleman, 1978). To respond, adapt, anticipate and take the initiative in such an environment firms have to develop new capabilities. As such, dynamic capabilities enabling quick adaptation to market changes are increasing in importance as a distinct
competitive advantage (Bettis & Hitt, 1995; Teece et al., 1997; Teece, 2007). Additionally, the way in which strategies are formulated and implemented to deal with this environment has been changing. The perspective of strategy as the process whereby executives of a business unit plan a strategy and the organization will implement that strategy has been considered limited for decades (Mintzberg and Waters, 1985). One of the ways this process has changed, is through the involvement of the business itself in formulating the strategy. An
example of this is how middle managers and other mid-level professionals have been more involved in the strategic process over the past few decades (Wooldridge, Schmid & Floyd, 2008). Research performed on the role of middle management in both strategy planning (Dutton & Ashford, 1993; Floyd & Lane, 2000; Currie & Procter, 2005) and strategy implementation (Guth & MacMillan, 1986; Huy, 2002, Rouleau & Balogun, 2011) have in common that middle management plays a key role in the outcome for organizations. As the role of middle management increases, this might provide organization and specifically the strategic process within organizations with the dynamic capabilities to adapt to the quickly changing environment. A key factor influencing the way middle management affects the organization is through their autonomy. Autonomy increases adaptive behaviour in uncertain environments (Andersen & Nielsen, 2009). As such, the measure to which middle
management is autonomous might be a key factor in providing the organization and
specifically the strategic process with the required capabilities in our dynamic environment. The autonomy of the middle management might influence both their involvement in the strategic planning and strategy execution. With more autonomy their influence might assist in making a more robust and flexible strategy while their autonomy also allows them to execute on the planned strategy while simultaneously adapting to the changing environment. While it is difficult to isolate these two effects, we can assess how the responsiveness of the
organization to a planned strategy increases without discerning between the effects of autonomy on the planning or execution steps specifically. As such, a more autonomous middle management can been seen as a moderating factor for the effectiveness of the
strategic process as a whole by having a positive moderating effect on the responsiveness of the organization to the strategy planning step. This leads to the research question central to
this thesis: What effect does autonomy of middle management have on the effect of strategic planning on the strategic responsiveness of organizations?
Theory and Hypothesis
Definitions
The strategic process we wish to assess is typically one of formulation or planning followed by implementation. While this is an important distinction, Mintzberg and Waters (Mintzberg & Waters, 1985) argue this does come with limitations and argue that understanding the strategic process as ‘a pattern in a stream of decisions’ provides a more tangible basis for research. This has led to a distinction between unrealized, deliberate and emergent strategy. Only after (partial) implementation can an evaluation be performed on which elements of the planned strategy were unrealized, which elements of the implemented strategy were
deliberate (i.e. were part of the planned strategy) and which elements of the implemented strategy were emergent (i.e. were not part of the planned strategy). As such, the organization as a whole, by responding and implementing the strategy, determines the final strategy that has been implemented. The whole strategic process can, therefore, be better understood through the perspective of strategic responsiveness. Andersen, Denrell and Bettis (Andersen, Denrell & Bettis, 2007) define strategic responsiveness as “The bundle of capabilities to assess the environment, identify firm resources, and mobilize them in effective responsive actions”. These can be categorized as activities and outcomes related to the formal strategic planning process and activities related to operationalizing strategy in the organization including the more informal activities that lead to the emergent strategy. Taking this
Strategic planning: activities and outcomes related to the deliberate planning of the strategy of the organization
Strategic responsiveness: activities both formal and informal related to operationalizing strategy in the organization
As discussed above, the role of middle management in this process is a key factor and this research will focus on the measure of autonomy of middle management. Autonomy is linked to the concept of centralization (Price, 1997). Centralization is the degree to which power is differentially distributed within an organization (Hall, 1982). However, centralization
encompasses more than just the autonomy of middle management we want to focus on in our research. Price uses the term autonomy as a different concept. His definition of autonomy regards the organization as a whole and defines autonomy as the degree to which an
organization has power with respect to its environment (Price, 1997). When we combine the concept of power with respect to your environment with the concept of centralization being the degree to which power is distributed within the organization we can apply this to middle management and get the following definition of autonomy:
Autonomy: the degree to which middle-management has power with respect to the rest of the organization
Relationship
Castells (Castells, 1996) and Child (Child, 1997) argue that increased autonomy increases responsiveness under uncertainty. However neither of these articles go into its influence on the strategic process. When the underlying logic is applied to the strategic process, this implies autonomy will increase the strategic responsiveness of an organization and would also increase the responsiveness of the organization to the outcomes of the strategic planning
Research gap
Previous research by Andersen and Nielsen (Andersen & Nielsen, 2009) proved a significant relationship between autonomy and adaptive behaviour and how this affects strategic
planning and organizational performance. This effect could be further investigated as to whether autonomy has a moderating effect on the strategic responsiveness of the organization to the outcomes of the strategic planning process.
Research question
Based on this gap we have defined the following research question:
What effect does autonomy of middle management have on the effect of strategic planning on the strategic responsiveness of organizations?
Hypothesis
Different authors have different visions on how the strategy process works and how various factors in the organization interact with the environment. Mintzberg and Waters (1985) consider the strategy as a pattern in a stream of decisions more than a formal process. They argue they can make a distinction in realized strategy into two separate parts. First the deliberate strategies which were planned and realized as intended. This encompasses the organization developing a formal strategy and the part of it that was executed by the
organization is considered the deliberate strategy. The second form of implemented strategy Mintzberg and Waters identify is emergent strategy. This consists of patterns or consistencies that were realized outside of the planned strategy. They further argue that the interaction between these two is what determines the final realized strategy and a relevant conclusion for our research is that the realized strategy of more centrally controlled organizations tend to
emergent strategy. While a more decentralized organization having more emergent strategy seems in line with our research question as it supports the idea that a more autonomous middle management is a key factor in the responsiveness of the organization to strategy it also contradicts our research question as it undermines the assumption underlying our research that the responsiveness of the organization is affected directly by strategic planning and not by the autonomy of middle management. It would suggest autonomy affects the strategic responsiveness of organizations and strategic responsiveness affects the measure to which realized strategy consists of deliberate and emergent strategy. This could lead to the assumption that strategic planning would mostly only affect the deliberate strategy while having little influence on the emergent strategy. We will revisit this assumption below and argue why we do not perform our research under this assumption.
Miles, Snow, Meyer and Coleman (Miles, Snow, Meyer & Coleman, 1978) argue most firms are operate in more and more highly dynamic environments and adjusting to this environment is enormously complex. In their research they penetrate this complexity to some degree by detecting patterns in the behaviour of organizations and laying down an initial attempt at a theoretical framework and conclude effective adaptation depends on the ability of managers to envision and implement changes, direct and control people within the organization and to understand the organization as an integrated but dynamic whole. The ability to adapt to this dynamic environment is key a factor in dealing with this complexity and can be considered a key competitive advantage. Bettis and Hitt (1995) reflected on the rate of technological change and how this affected technology-intensive firms and firms that intensively use technology. They argue the ability to develop new tools, concepts and mind-sets is key for organizations to survive the highly turbulent and often chaotic environments. They predicted this would only increase in the twenty first century and we argue this has not only come to be
true but, additionally, most organizations can now be considered to use technology intensively. Teece (1997, 2007) argues organizations can achieve and sustain competitive advantage by developing dynamic capabilities. Especially the ability to create, extend, upgrade, protect and keep relevant assets and know-how which are difficult to imitate. Especially if this ability itself is also difficult to imitate. He further argues that these dynamic capabilities reside in large measure with the management of the organization but are impacted by the processes, systems and structures. We would argue middle management is also key to these capabilities and the especially the strategic process and related structure is relevant to achieving such sustained competitive advantages. In support, Andersen and Nielsen (2009) argue that autonomous and participatory strategy planning facilitates adaptive behaviour especially in uncertain environments. They make the distinction, important to our research, between on one side strategic planning as the activities and outcomes related to the deliberate planning, and on the other side strategic responsiveness as activities both formal and informal related to operationalizing the strategy. Based on their review of research into the efficacy of intended versus emergent strategy on one side and the importance of central planning and rigid organizational structures on the other side they point out that one can considered strategic planning and autonomy as separate and independent factors. Based on their own research they conclude a strategy making process that combines autonomy and strategic planning leads to better performance through the realized strategy which consist of both emergent and intended strategy. The perspective of Andersen and Nielsen builds on, but to a degree is also contrary to, Mintzberg and Waters argument above, as the perspective of Andersen and Nielsen entails that strategic planning also directly affects strategic responsiveness while from Mintzberg and Waters perspective strategic planning would mostly affect deliberate but not emergent strategy. Andersen and Nielsen further detail that,
by delegating decision power to lower organizational levels, the organization can respond faster to the highly dynamic environment. Simultaneously, strategic planning activities mange the efficiencies through alignment and coordination of strategic responsiveness activities. By additionally involving middle managers in the strategic planning process itself, information useful for the strategic planning process is more effectively used. Broader research has confirmed middle management plays a key role in the performance of
organizations including its strategic process (Dutton & Ashford, 1993; Floyd & Lane, 2000; Currie & Procter, 2005; Guth & MacMillan, 1986; Huy, 2002, Rouleau & Balogun, 2011). For example, Dutton and Ashford argue top managers can be more effective when they direct their attention and resources based on issues brought to them from middle managers.
Additionally, Rouleau and Balogun argue middle managers are key by enacting the strategic changes throughout the organization. Middle managers make a strategic message meaningful, engaging and compelling by using their skill at the social process of interpreting, gain
understanding, creating meaning and creating sense for themselves and others about
organizational changes. The perspective of Andersen, Nielsen, Dutton, Ashford, Rouleau and Balogun provides a more robust view of the interactions between the autonomy of middle management, strategic planning and strategic responsiveness then the view we would have based purely on the research by Mintzberg and Waters. This view leads to our assumption where strategic planning affects strategic responsiveness and autonomy plays a role in that interaction,
An underlying assumption we wish to address before we proceed to formulating our
hypotheses is that organizations behave rationally and predictably. An organization consists of many actors each with their own behavioural patterns. The assumption would be that the behavioural patterns of groups within the organisation and the behavioural patterns of the
organization as a whole are similar to the behavioural patterns of subgroups and individuals within the organisation. For our research we would assume the behaviour of middle
management will be in line with the behaviour of the whole organization, as in working towards the same goals using the same activities and predictable behavioural patterns. However, the behaviour of managers can be unpredictable when in dynamic environments. Mitchell, Shepherd and Sharfman (2011) argue that managers make more erratic strategic decisions in hostile environments. They make a distinction between the lack of consistency in strategic decisions as attempts to adapt to changing environmental conditions and such lack without an obvious cause, the sources for the latter being the subject of their research. They conclude that, while dynamic environments seem to lead to more consistent decisions, hostile environment lead to more erratic behaviour. The former, where dynamic environments lead to more consistent decisions, gives us some confidence the decisions and thus the strategic process is consistent. A key source in decision making Mitchell, Shepherd and Sharfman utilize in their research is the metacognition of the individual. They define metacognition as the conscious reflection about your own thinking and the ability to reflect upon, understand and control cognitive processes relating to a concrete goal or objective. While being aware of one's thought and decision processes helps making more consistent decisions it also points out the relevancy of goals. If the goals of the individual manager and the goals of the organization are not aligned the behaviour of the groups within the organization and of the organization as a whole will be more difficult to predict. One can imagine that in a hostile environment the goals related to self-preservation might divert from the goals of the organization. Powell (1992) also reflects on this in the broader context of organizational alignment, concludes that greater organizational alignment does lead to better performance in some organizations, and argues organizational alignment can constitute a sustainable
competitive advantage. Powell, however, does not delve into the specifics such as misaligned goals. Wood and Bandura (1989) do delve into the behaviour of humans in organizations and point out behaviour is often considered one-sided and deterministic. They argue that actually behaviour, cognitive and other personal factors operate interactively and in both directions with environmental events. Their research further suggest that alignment of personal goals can enhance organizational performance. In fact, they argue the believe in the attainability of goals can directly affect your functioning. A lack of believe leads to stress and impaired functioning, while a strong believe in self-efficacy leads to setting higher goals. Specifically, Gut and MacMillan (1986) argue that when middle managers believe their self-interest is being compromised they can delay the implementation of strategy, reduced the quality of the implementation, or even sabotage the strategy and recommend a variety of means to address such behaviour including persuasion, coercion and obligation. We consider these behavioural complexities beyond the scope of our research, as we aim to measure strategic causes and effects of the whole organization regardless of the hostility of the environment and the behaviour of individuals, but, if necessary, will reflect on it when discussing our conclusions. Based on the considerations in this hypothesis section, we argue that specifically the
autonomy of middle management, through the strategic process of the organizations, plays a key role in attaining a sustained competitive advantage in adapting to the highly dynamic environment. Middle management autonomy does not affect just strategic planning or strategic responsiveness, but has an effect on both (e.g. more robust and flexible strategy, better execution of the planned strategy and better adapting through emergent strategy). The autonomy of the organization effects both strategic planning and strategic responsiveness through a positive moderating effect on the interaction between the strategic planning
we will test in our research. Hypothesis one is our underlying assumption and we define it as (H1) the positive effect of strategic planning on strategic responsiveness. Hypothesis two lies at the core of our research and we define it as (H2) the positive moderating effect of
autonomy on the effect of strategic planning on strategic responsiveness.
Model
Our research question and hypotheses can be represented visually using the model in figure 1 below.
Figure 1: Research model
Method
Population
When measuring strategic planning, autonomy and strategic responsiveness for our research question, the population exists of employees employed in organizations that might have a defined strategic process and might have middle management.
Sample and data collection
An online survey will be used to minimize the barrier to taking part in the survey and reach an as large section of the population as possible. The population consists of individuals employed by a firm. This means unemployed or self-employed individuals are outside the population. Such individuals will be excluded from the survey by adding the following notice at the start of the survey: “This survey is about strategy implementation within your
organization. If you are self-employed or unemployed you can skip this survey.”. The survey as a whole is attached in Appendix 1.
The sample used for our research will be based on a self-selection process by sending out a message through LinkedIn and through the author’s network asking the recipient to complete the survey. In the message a request was included to spread the survey further through professional networks with the intent to pursue snowball sampling. This sample and collection approach comes with advantages and disadvantages to our research (Wright, 2017). Key advantages of this approach are that we do not have to predefine a sample and send the survey out to a limited group. This results in less time and costs and has the potential to reach a greater part of our population through a snowball effect. Additionally, individuals choose to take part in the research and, therefore, are more likely to complete the survey and provide honest and accurate answers. The key disadvantage is that this selection process comes with a systematic bias of unknown impact that limits how well the results of our research can be generalized. We include this effect in the discussion of our limitations.
Measuring constructs
Snow and Thomas argue that without construct measurement the advancement of the strategy field is difficult (Snow & Thomas, 1994). As such, strategic planning and autonomy will be
measured using structural equation modelling on underlying constructs. In his ‘Handbook of organizational measurement’ Price argues there are four criteria in selecting underlying constructs or indicators: quality, diversity, simplicity and availability (Price, 1997). In our research these indicators will be used to identify these constructs using a selection of specific questions on a 5-point scale for each of these constructs. To get an as accurate and unbiased measurement of the perception of employees of these constructs as possible, questions with both a positive and a negative framing will be posed for each construct. Not testing the fit and not adjusting the construct model when necessary are considered two of the key pitfalls of structured equation modelling (Savalei & Bentler, 2010). As such, we will first test the fit of our questions underlying the constructs by confirming their reliability in measuring the same variable and we will adjust the model for each construct if necessary. Then an average will be calculated for each construct measure
Dependent variable: strategic responsiveness
Strategic responsiveness is driven by adaptive behaviour such as the capability to generate new ideas, devices, systems, policies, programs, processes, products and services. Andersen and Nielsen (Andersen & Nielsen, 2009) argue organizations can cope with dynamic change not only through product development and technology adoption but also by integrating technical and administrative initiatives to overachieve on goals. As such, strategic
responsiveness not only consists of changing the product offering or approaching new clients but also by doing things differently or by changing the way the work is carried out. We have included four questions in our survey that correspond to these four indicators. We keyed one question negatively.
Boyd & Reuning-Elloitt argue that using a multiple indicator approach, strategic planning can be reliably measured and identified by a mission statement, trend analysis, competitor
analysis, long-term plans, annual goals, short-term action plans and ongoing evaluation as key indicators of strategic planning (Boyd & Reuning-Elliott, 1997). They point out the presence of unmeasured disturbances or the potential for other indicators in their model but their research indicates adequate variability within these indicators, no substantial threat from compressed variance nor multicollinearity. As such, these seven indicators meet the quality and diversity criteria and will be used as underlying indicators in measuring strategic planning. We have included ten questions in our survey to measure these indicators. We keyed three questions negatively.
Moderating variable: autonomy
Based on research by Andersen and Nielsen (Andersen & Nielsen, 2009), autonomy can be measured by posing the questions regarding what managers below the top management team can do: can they start major market activities without approval, can they market to new customers segments without approval, do they need approval to initiate new product
developments, can they introduce new practices without approval, do they need approval to develop new internal capabilities. We have included five questions in our survey to measure these indicators. We keyed two questions negatively.
Control variables
Other factors might influence our three constructs, we have measured the following common factors used in the organizational measurement (Price, 1997): gender, age, management position, tenure at the organization, organization industry, organization size, organization age and organization revenue. We will analyse if these factors might explain variations between
our constructs and determine if any of them need to be included in the testing of our hypotheses.
Analysis approach
To quantify the effect of strategic planning on strategic responsiveness, a regression analysis will be performed and the significance of the relation will be tested.
To analyse the moderating effect of autonomy on the effect of strategic planning on strategic responsiveness, a conditional effect regression analyses will be performed on the relationship between strategic planning and strategic responsiveness given the autonomy of middle management and the significance of the relation will be tested. A P-value of up to 0.10 will be considered statistically significant.
Analysis
Validation
The total number of respondents is 35. All 19 questions measuring the indicators underlying our constructs were mandatory. Surveys with questions without results are either incomplete or should be considered technical anomalies. We identified four responses missing answers to any of these questions and excluded these from our analysis. Using frequencies analysis and descriptive statistics no further anomalies were identified. The final number of respondents used for analysis is 31.
Structural Equation Modelling Strategic responsiveness
reversing the answers on the 5-point scale. A reliability analysis was performed on the four questions (using the recoded variable for the fourth question) in SPSS. With a reliability of only 0.128, the questions have a low reliability in measuring the same construct. The Item-Total Statistics are displayed in the figure below:
Figure 2: Item-total statistics for strategic responsiveness
As can be seen in figure 2, no question has a high (at least 0.30) correlation to the total and the total reliability would be significantly changed with the removal of each question. This indicates the questions are not measuring the same construct (Savalei & Bentler, 2010). The construct strategic responsiveness cannot reliably be constructed by calculating the mean of the answers to these four questions. Each of the individual questions will be considered as a potential representation of strategic responsiveness when testing our hypotheses.
Strategic planning
Strategic planning is measured by ten questions that use a 5-point scale in our dataset. The fifth, eighth and ninth questions are negatively keyed and have been recoded into a new
variable by reversing the answers on the 5-point scale. A reliability analysis was performed on the ten questions (using the recoded variables for negatively keyed question) in SPSS. With a Cronbach’s Alpha of 0.788 the questions have a high reliability in measuring the same construct (more than 0.70). The Item-Total Statistics are displayed in the figure below:
Figure 3: Item-total statistics for strategic planning
As can be seen in figure 3, question three has a low (below 0.30) correlation to the total and the reliability could be improved from 0.788 to 0.844 by deleting it. Although this
improvement of 0.056 is not strong (i.e. more than 0.1), the negative correlation of this question with the total leads us to remove this question to increase the reliability of the construct. The nine other question have a high (at least 0.30) correlation to the total. The total reliability could not be improved by the deletion of any other question. These results indicate that the content of these nine question are measuring the same construct. A new variable was calculated, representing strategic planning, by calculating the mean of the answers to the nine remaining questions for each of the respondents.
Autonomy
Autonomy is measured by five questions that use a 5-point scale in our dataset. The first and second question are negatively keyed and have been recoded into a new variable by reversing the answers on the 5-point scale. A reliability analysis was performed on the five questions (using the recoded variables for negatively keyed question) in SPSS. With a Cronbach’s Alpha of 0.637 the questions have a limited reliability in measuring the same construct. The Item-Total Statistics are displayed in the figure below:
Figure 4: Item-total statistics for autonomy
As can be seen in figure 4, question two has a low (below 0.30) correlation to the total and the reliability could be improved from 0.637 to 0.670 by deleting it. This improvement of 0.033 is not strong, it does not push the correlation to more than 0.7 and its own correlation to the total is positive. This does not warrant deleting the question as it does seem to measure the same construct. As such, all five questions were used to calculate a new variable representing autonomy.
Correlation matrix
A correlation matrix including means and standard deviations was generated in SPSS. We included all potential control variables from our survey in the correlation matrix to evaluate if we want to control for the effect of any of these variables. The correlation matrix is displayed in figure 5 below. The Cronbach’s Alpha values between the potential control variables and other variables are displayed in blue with significant correlations marked in dark blue. The correlations relevant to our hypotheses are marked in purple.
Figure 5: Correlation matrix for potential control variables, strategic planning, autonomy and the four strategic responsiveness questions
At this time there is no significant correlation between strategic planning and the strategic responsiveness questions supporting our first hypothesis (column 9 rows 11 to 14). The highest correlation between strategic planning and a strategic responsiveness question is with question two which has a correlation of 0.193 (column 9 row 12). Additionally, at this time there is no significant correlation between autonomy and the strategic responsiveness questions that would indicate support for our second hypothesis (column 10 rows 11 to 14). With a correlation of 0.309, question two has the highest correlation with autonomy which makes it the most valid for our second hypothesis (column 10 row 12). We check for
non-collinearity between strategic planning and autonomy because if they are collinear they might be measuring the same construct and we cannot test for a moderating effect. There is no significant correlation between these variables and in fact at 0.062 the correlation is very low and thus we can assume non-collinearity (column 9 row 10). We will further test our hypotheses through regression analysis and will use the second strategic responsiveness question regarding the frequency of approaching new clients as a placeholder for strategic responsiveness. Using such a placeholder imposes limitations on our research which will be detailed in the limitations section. Considering strategic planning, autonomy and the second strategic responsiveness question (rows 9, 10 and 12 columns 1 to 8), only the firm industry control question has a significant relationship with any of these variables (column 6) and will be used as control variable in the regression analysis for our second hypothesis.
Hypothesis testing using regression analysis
H1: effect of strategic planning on strategic responsiveness
Regression analysis for our first hypothesis was performed using Linear Regression in SPSS. It involved strategic planning as independent variable, strategic responsiveness as the
dependent variable and firm industry as a control variable. The results are visible in figure 6 below:
Figure 6: Model summary for the hypothesis regarding the effect of strategic planning on strategic responsiveness
The R of 0.193 is in line with the correlation from our correlation matrix above. The adjusted R square (0.004) is very small meaning only a very small proportion of the variance in strategic responsiveness can be explained by strategic planning. The P value of the model is 0.297. This is over the 0.10 limit we imposed and, as such, this effect is not significant. We cannot confirm our first hypothesis with our data.
H2: moderating effect of autonomy on the effect of strategic planning on strategic responsiveness
Regression analysis for our second hypothesis was performed using the Process plugin for SPSS by Andrew F. Hayes (Hayes, 2013). His model 1 was used to perform a moderation analysis. The full results are available in the appendix. It involved strategic planning as independent variable, strategic responsiveness as the dependent variable, autonomy as a moderating variable and firm industry as a control variable. The interaction variable representing the moderating effect of autonomy on the relationship between strategic
planning and strategic responsiveness has a P value of 0.6230. This is more than the limit of 0.10. This means the moderating effect of autonomy cannot be considered significant. In fact, with a P value of 0.4182 the whole model is not significant. This was likely given the lack of a significant effect of strategic planning on strategic responsiveness. Our model with the effects and P-values that resulted from our analysis is displayed visually in figure 7 below.
Figure 7: Model with effect values and their P values.
To delve deeper into the conditional effect of strategic planning on strategic responsiveness for a given autonomy, we use the table from the process results as visible in in figure 8 below.
Figure 8: The conditional effect of strategic planning (X) on strategic responsiveness (Y) for three given autonomies (AU_Tot)
We see that for any of the three given autonomy values in the first column (AU_Tot) the effect of strategic planning on strategic responsiveness as visible in the second column
(Effect) is not considered significant as the P values in the fifth column (p) range from 0.3070 to 0.8019. If our first hypothesis was true these values should have been under 0.10 limit we
imposed. As the value for autonomy increases (first column) the effect of strategic planning on strategic responsiveness decreases (second column). This is actually the opposite of the expected effect in our second hypothesis. However, as the moderating effect as a whole cannot be considered significant the direction of the effect is also not substantiated.
Conclusion
Commonly middle management plays a key role in the outcome of organizations. In our analysis we set out to test to prove the intuitive and theorized assumption that middle manage has such an effect on the strategic process, consisting of strategic planning and strategic responsiveness, through their level of autonomy. We analysed 31 respondents to our survey to determine if we could confirm this effect. We started by building the constructs for strategic responsiveness, strategic planning and autonomy based on the answers to the questions underlying these constructs taken from literature. Using the answers to these questions we could reliably construct variables for strategic planning and autonomy but were unable to do so for strategic responsiveness. The questions underlying strategic
responsiveness did not seem to be measuring the same construct. Although this comes with significant limitations we used the question related to strategic responsiveness that was most likely to show an effect as its placeholder. Using the constructed variables and controlling for the effect of firm industry we first tested if strategic planning affects strategic responsiveness. We did not find a significant effect. We could not confirm strategic responsiveness of
organizations is affected by strategic planning. When we added autonomy to the model a strange thing occurred: we saw an opposite effect. Increased autonomy seemed to reduce strategic responsiveness. However, as this moderating effect was neither large nor
could not determine if middle management plays a key role in the strategy of organizations through an increase or decrease of their autonomy as we did not measure a significant influence on strategic responsiveness by strategic planning, nor did we measure a significant moderating effect by autonomy.
Implications
Our research does not yet indicate a scientific significant effect of autonomy of middle management on the strategic process of an organization. This is contrary both to intuition and research done in other areas. Intuitively more autonomy for human beings in uncertain environments increases successful adaptive behaviour and research by Castells (Castells, 1996) and Child (Child, 1997) confirm this. Also organizations no longer hire middle
management only to pursue operational effectiveness but also provide information key to the strategic process, involve them in planning strategies and rely on them to support in
executing strategies successfully (Wooldridge, Schmid & Floyd, 2008; Dutton & Ashford, 1993; Floyd & Lane, 2000; Currie & Procter, 2005; Guth & MacMillan, 1986; Huy, 2002, Rouleau & Balogun, 2011). Autonomy and adaptive behaviour would intuitively seem to be key here and literature supports this (Andersen & Nielsen, 2009). Why then have we not measured this affect in companies in our research? Organization are complex structures of individuals with complex behaviour. We can recognize patterns in the behaviour of individuals and can create a model of behaviour of groups. But perhaps the behaviour of organizations is too complex to effectively and reliably apply this to the organizations as a whole. Even if a more autonomous middle management did displays more adaptive
behaviour in uncertain conditions as is argued by Andersen and Nielsen, this behaviour might not be affecting the good of the whole organization (in our research by a moderating effect on
the strategic process). Instead it might be used for self-preservation within the organization without benefit or maybe even to the detriment of the organization as a whole. This is in line with research from Gut and MacMillan (1986). They argue when the self-interest of middle managers is compromised they can delay and even sabotage strategic implementations. The strange and unsubstantiated reversed effect of autonomy on strategic responsiveness in our research, had it been significant, would have been an indication for such behaviour.
Additionally, autonomy is not the only behavioural component within organization. Other behavioural components play a role, especially at the middle management level. Wood and Bandura (1989) concluded that the commonly used view of behaviour in organisations as one-sided and deterministic does not reflect reality. Organizations should carefully consider their assumptions, both intuitive and research based, and closely monitor how their
organization as whole and the individuals within it respond to the increasingly more dynamic environment. Our research also has implications regarding how the strategy process really operates and is affected. First it might be that autonomy affects the strategic process in a different way. Perhaps the effect argued by Castells (Castells, 1996) and Child (Child, 1997) as described in our theory and hypothesis chapter where autonomy increases responsiveness under uncertainty does not apply as we expected to how the strategic planning and strategic responsiveness constructs we defined as part of the strategic process. Secondly, there might be a high level of endogeneity either due to an unclear or circular causality between the interaction of autonomy and the strategic process. For example, if strategic planning and strategic responsiveness have an effect on autonomy as well (e.g. causality is also reversed) it will be difficult to determine the exact interactions and effects and isolate the moderating effect of autonomy in our test. Also, when setting our hypothesis we considered the perspective of Mintzberg and Waters (1985), where strategic planning mostly affects
deliberate strategy but hardly affects emergent strategy, improved upon by later research by Andersen, Nielsen, Dutton, Ashford, Rouleau, Balogun and others. However when setting our assumption based on their research, where strategic planning affects strategic
responsiveness broadly and thus affects both the emergent and the deliberate parts of realized strategy, might have missed important nuances or distinctions. Tertiary the effect of
autonomy might be too ambiguous to be discernible within the strategic process. It might be the effect is only measurable when measuring the effect of autonomy directly on the
performance of organization or as a moderating effect on the effect of strategy on the performance on the organization. Price argues in his section on organizational effectiveness that it is difficult to isolate and measure performance because there are different types of measurements for performance and also many variables that directly and indirectly affect performance (Price, 1997). Regarding the constructs used in our research we have varying results. Autonomy and strategic planning where reliably constructed but strategic
responsiveness could not be constructed. This implies a difference between autonomy and strategic planning on one side and strategic responsiveness on the other side. The lack of a reliable construct for strategic responsiveness might implicate this construct from literature cannot be generalized to the whole population or perhaps there are different subgroups within the population and the geographical, cultural or social differences between these subgroups have an significant impact on the validity of the construct. Possibly the constructs of
autonomy and strategic planning are more universal and more easily isolated and measured. This implies there is a decent amount of variety in the reliability of constructed variables and the measurement of their effects and organization should be mindful of this when making their decisions based on quantified information.
Limitations
Our sample is 31 and this is considered small for structural equation modelling (Savalei & Bentler, 2010). If all the constructs and effects literate leads us to believe should exist do indeed exists in our population, then the probability of finding a significant effect in a statistical test depends mainly on the size of the effect and the size of the sample (Savalei & Bentler, 2010). As such, with a sample size of 31 there is limited power to prove any but the strongest correlations. Additionally our approach to distributing the survey results in a self-selection bias might have resulted in sample that is not representative of the population. Typically that limits the generalization of our results but it also might have interfered with finding the constructs and effects we theorized and intuitively expect in the population. Also by not scoping our population down to a more narrow set based on geographical, cultural or social differences we might be measuring a population that is very diverse with regards to our variables. While this benefitted how well our research can be generalized this also has
reduced the possibility to positively test for effects. Additionally, while our research questions are based on existing research, we might not have captured the elements of the constructs accurately with our questions. Especially the use of negatively keyed questions, while intended to counter bias, might have interfered with our measurements to the detriment of the accuracy. Specifically for strategic responsiveness because we could not create a reliable construct we had to rely on testing against the most likely question underlying the construct. This ‘most likely candidate’ is an optimistic approach and if the tests had led to a significant effect this would only have been an ‘indication’ of an effect on strategic
our hypotheses and as such we did not validated any of the assumptions of regression analysis with regards to the residuals.
Discussion
In the introduction and hypothesis we theorized that autonomy of middle management would influence the strategic process by moderating the effect of strategic planning on strategic responsiveness. Key to this are the arguments by Andersen and Nielsen (2009) and Miles, Snow, Meyer & Coleman (1978) that adjusting to uncertain environments leads to adaptive behaviour and the arguments by Wooldridge, Schmid and Floyd (2008), Dutton and Ashford (1993), Floyd and Lane (2000), Currie and Procter (2005) and again Andersen and Nielsen, with regards to middle management playing an important role in the strategic process and thus this adaptive capability. Mintzberg and Waters (1985) argue that the process of executives planning and the organization implementing strategy is outdated and strategy is more a pattern in a stream of decisions. In our research we tried to unify the ideas of Mintzberg and Waters with those of the other aforementioned authors by separating the strategic process into strategic planning and strategic responsiveness and arguing middle management affects the interaction between these two. However our tests were inconclusive. We could isolate and measure autonomy and strategic planning but we were unable to do so for strategic responsiveness and, additionally, were unable to find significant effects. While our goal was to test and discuss the effect of autonomy on the strategic process we actually have to reconsider a number of our assumptions. Previous research did find an effect of autonomy on strategic process. Besides the research by Andersen and Nielsen, specifically the conclusions by Rouleau and Balogun (2011) in their research on how middle managers make a strategic message meaningful, engaging and compelling by using their skill at the
social process of interpreting, gain understanding, creating meaning and creating sense strongly support this. As such, we are now forced to reconsider if the nuances and
conclusions made by Mintzberg and Waters are ignored when separating the strategic process into the planning and responsiveness and additionally assuming an effect in one direction between these two. In fact our lack of an effect between planning and responsiveness itself seems to confirm Mintzberg and Waters argument that it is a stream of decisions with interactions in multiple directions between various actors and strategic planning might not affect the strategic responsiveness of the organisation. As we detailed in our implications section above our research seems to indicate it is hard to isolate and measure all the relevant factors in the strategic process. While autonomy and strategic planning can be constructed, the lack of a construct for strategic responsiveness and the lack of significant effects, reduces the usefulness of the successfully calculated constructs. Additionally, the behaviour of individuals in organizations might differ from what would be expected, for example, due to diverging personal goals and cultural, geographical and social differences. This is especially supported by the research by Gut and MacMillan (1986) into the behaviour of middle managers when their self-interest is compromised. Additionally the research by Mitchell, Shepherd and Sharfman (2011) has shown there are nuances between environments,
especially with regards to the dynamic nature and the hostility of the environment that affect the behaviour of managers differently. In fact, they concluded that, while highly dynamic environments leads to more consistent behaviour, hostile environments actually lead to more erratic behaviour. However all this is overshadowed by the limitations on our research. These have a serious impact on this discussions. Firstly, the limited sample size has put constraints on the weight we can assign to the (lack of) results in our research. The seriousness of the implications and the issues we brought forward so far in this discussion are lessened because
a sample size of 31 is considered very small for analysis using structural equation modelling. As a result, the lack of a reliable strategic responsiveness constructs can just as easily, or perhaps more easily, be explained by both the small sample size and the geographical, cultural and social very broad population. Even more so if one considered the self-selection bias. As a result of the lack of a successful construct for strategic responsiveness we also selected a placeholder question for strategic responsiveness. These issues combined are likely to have contributed to the lack of significant effects. As such, we are very hesitant to end our discussion with strong conclusions regarding the implications of our research. However we do argue these results raise new and reiterate old questions that require further research.
Future research
There are a number of direct questions that our research reiterates or newly raises: Why could we reliably construct variables for autonomy and strategic planning but not for strategic responsiveness? Why even when using a placeholder question for strategic responsiveness was there no significant relationship between it and strategic planning? Even though it was not significant, why did autonomy have a negative moderating effect? As detailed above there are a number of answers to these questions varying from limitations to our research to reconsidering if we can reliably theorize and measure behaviour within organization. We primary recommendation for future research is to test the constructs and research question using a significantly larger sample which has been limited to a population that is more
homogeneous with regards to geography, culture and social factors. With the main limitations of our research overcome in this way, future research could provide stronger evidence for (or against) the veracity of the implications of our research. If this leads to the same results and implications further research into the field should focus on a number of things. Firstly, is
there a model of the strategic process consisting of strategic planning and strategic
responsiveness and the influence of middle manager autonomy on that process that is reliable and can be generalized broadly? How can the perspectives of Mintzberg, Waters, Andersen, Nielsen, Teece and others be combined in a universal model? If this is not possible, is this issue one with regards to different geographical, cultural or social influences? If so, can we find specific subgroups where a model of the strategic process and the influence of middle management autonomy does hold up? Or is this issue one with regards to the assumption that behaviour is consistent and aggregable? In that case, can we isolate and control for erratic, non-deterministic or divergent behaviour? Perhaps this is driven by factors in the internal or external environment such as the hostile environment identified by Mitchell, Shepherd and Sharfman (2011) or the compromised self-interest identified by Gut and MacMillan (1986)? Can we create a model where we can measure and control for these measures in that case? Perhaps it is a combination of these issues and we must take them both in account to find reliable models. Or, finally, must we conclude higher autonomy does not improve strategic responsiveness and autonomy of middle management does not play a key factor in the strategic process?
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