1
Trade-offs and compatibilities
The effect of the perceived interrelations between performance
dimensions on strategic alignment between supervisors and
subordinates
Master Thesis
MSc Supply Chain Management
August 2020
Supervisor: prof. dr. J. (Jan) de Vries Co-assessor: dr. K. (Kirstin) Scholten
Word count: 9946
Author: Xavier de Maa
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ABSTRACT
In literature, there are two opposing approaches that describe the interrelations between performance dimensions. The opposing approaches are the sand cone model (which describes the interrelations between performance dimensions as compatibilities) and the performance frontier (which describes the interrelations between performance dimensions as trade-offs). Thus, in theory the interrelations between performance dimensions has been a controversial topic which in practice might have an effect on strategic alignment. Through a multiple case study of 3 organisations, supervisors and subordinates were interviewed to study the effect of the perceived interrelations between performance dimensions on strategic alignment between supervisors and subordinates. This study shows that supervisors have a focus on cost whereas subordinates tend to focus on performance dimensions other than cost (i.e. quality, speed, dependability, flexibility). Findings suggest that perceiving trade-off interrelations leads to a focus on cost and vice versa. Also, perceiving compatibilities leads to a focus on performance dimensions other than cost and vice versa. The underlying mechanisms that may explain these differences are that supervisors consider constraints for improvement (referring to the performance frontier) whereas subordinates consider opportunities for improvement (referring to the sand cone model).
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TABLE OF CONTENT
1. INTRODUCTION ... 4
2. THEORETICAL BACKGROUND ... 6
2.1 Strategic alignment ... 6
2.2 Interrelations between performance dimensions ... 6
2.3 The context: decision areas ... 7
3. METHODOLOGY ... 9 3.1 Research design ... 9 3.2 Case selection ... 9 3.3 Data collection ... 11 3.4 Data analysis... 11 3.5 Quality criteria ... 14 4. FINDINGS ... 15
4.1 Within case analysis ... 15
4.1.1 Organisation A ... 15
4.1.2 Organisation B ... 17
4.1.3 Organisation C ... 19
4.2 Cross-case analysis ... 21
4.2.1 Important performance dimensions ... 22
4.2.2 Interrelations between performance dimensions ... 22
4.2.3 Underlying mechanisms ... 23
5. DISCUSSION ... 25
5.1 Important performance dimensions ... 25
5.2 Interrelations between performance dimensions ... 26
5.3 Underlying mechanisms ... 27 6. CONCLUSION ... 29 6.1 Theoretical implications ... 29 6.2 Managerial implications ... 29 6.3 Limitations... 29 6.4 Future research ... 30 REFERENCES ... 31 APPENDICES ... 34
Appendix A: Interview guide ... 34
Appendix B: Operations strategy matrices ... 37
Organisation A ... 37
Organisation B ... 38
Organisation C ... 39
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1. INTRODUCTION
Until the late 80’s, strategic alignment was defined as agreement among managers from the top management team on strategic ends and means (Bourgeois, 1980; Bourgeois & Singh, 1983; Dess & Keats, 1987). Two decades later, Kellermanns, Walter, Lechner & Floyd (2005) suggested a broader definition: “Strategic alignment is the shared understanding of strategic priorities among managers at the top, middle, and/or operating levels of the organisation”. However, research on strategic alignment has mainly been done on the strategic level and provides little insight on the operational level (Gutierrez & Serrano, 2008). Edh Mirzaei, Fredriksson, & Winroth, (2016) studied the alignment of operations strategy between organisational levels based on perceptions of performance dimensions of managers and operators. They made propositions for future research and describe that strategic alignment between the strategic level and the operational level is yet to be further explored.
The operations strategy is formulated as “a pattern of choices concerning the operations objectives and the main lines of the operations processes, interrelationships, their technical infrastructure, and their control systems” (Van Aken, 1978, p. 42). Operations strategy describes the relative importance of performance dimensions such as quality, speed, dependability, flexibility, and cost for operations (Wijngaard, De Vries & Nauta, 2006), also known as competitive priorities (Boyer & Lewis, 2002). According to the relative importance in performance dimensions, appropriate decisions must be made for the operations to be effective (Drohomeretski, Gouvea da Costa, Pinheiro de Lima, & Garbuio, 2014). In other words, decisions must be aligned with the relative importance in performance dimensions to create strategic alignment. This is important as strategic alignment in operations increases operational performance (Smith & Reece, 1999; Joshi, Kathuria, & Porth, 2003; Yuliansyah, & Jermias, 2018). However, creating and sustaining strategic alignment in decisions on operations might be difficult since “Decisions on operations are made thousands of times per day by virtually every individual in the organization” (Boyer & McDermott, 1999, p. 290).
5 Thus, further investigating the perceived interrelations between performance dimensions and its influence on strategic alignment is interesting because first of all, strategic alignment between the strategic level and the operational level is yet to be further explored (Edh Mirzaei, Fredriksson, & Winroth, 2016) and second of all, there are many individuals making decisions on operations. Individuals from strategic and operational levels may have a different understanding on the interrelations between performance dimensions, which might influence strategic alignment. It is therefore interesting to study which performance dimensions supervisors and subordinates find important and how this is influenced by the perceived interrelations between performance dimensions. Do individuals that perceive a certain interrelation consider different performance dimensions to be important? What causes individuals to perceive different interrelations? Hence, the following research question:
What is the effect of the perceived interrelations between performance dimensions on strategic alignment between supervisors and subordinates?
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Figure 1 The interrelations between performance dimensions
2. THEORETICAL BACKGROUND
2.1 Strategic alignment
“Strategic alignment is the shared understanding of strategic priorities among managers at the top, middle, and operating levels of the organisation” (Kellermanns et al., 2005, p. 721). In other words, individuals from all organisational levels within an organisation must acknowledge the same priorities in order to create strategic alignment. Considering operations strategy, strategic alignment entails that supervisors and subordinates have a similar understanding on the relative importance in performance dimensions. Quality, speed, dependability, flexibility and cost are widely known as the performance dimensions (Slack & Lewis, 2002; Wijngaard, De Vries & Nauta, 2006). If supervisors and subordinates within an organisation focus on different performance dimensions, this is an indication of strategic misalignment. On the other hand, if supervisors and subordinates within an organisation find the same performance dimensions important, there is strategic alignment. Strategic alignment between supervisors and subordinates on performance dimensions is important as it might increase operational performance (Smith & Reece, 1999; Joshi, Kathuria, & Porth, 2003; Yuliansyah, & Jermias, 2018). High levels of operational performance for the five performance dimensions are high quality, high speed, high dependability, high flexibility, and low cost (or high cost reduction).
2.2 Interrelations between performance dimensions
7 Supervisors and subordinates may not necessarily have a mutual understanding on the interrelations between performance dimensions (Sarmiento, Knowles & Byrne, 2008). For example, supervisors may consider trade-offs whereas subordinates might consider compatibilities, and vice versa. This difference might influence the focus of supervisors and subordinates on performance dimensions, and therefore the strategic alignment between supervisors and subordinates. However, the effect of the perceived interrelations on strategic alignment is still unclear. Therefore, the research question is What is the effect
of the perceived interrelations between performance dimensions on strategic alignment between supervisors and subordinates? Sarmiento, Knowles & Byrne (2008) propose that ideally, the emphasis
and importance placed on each performance dimension should be matched by the emphasis and importance placed on the potential trade-off or compatibility interrelation between any given pair of performance dimensions. However, empirical evidence to support this proposition is currently missing.
2.3 The context: decision areas
Context is required in order to investigate the strategic alignment between supervisors and subordinates and the effect of the perceived interrelations between performance dimensions. Therefore, the decision areas of the primary process are involved to provide context. According to Hill, Collier, Froehle, Goodale, Metters & Verma (2002), primary processes are the core processes of an organisation and create the core competencies. Mturi & Johannesson (2013) add that primary processes consist of activities that are directly creating customer value. Porter (1989) distinguishes activities within primary processes and concern the inbound logistics, operations, outbound logistics, marketing and sales, and service. As the main task of operations is to produce goods and provide services (Shavarini, Salimian, Nazemi, & Alborzi, 2013), the primary process is a dominant function of operations. Decisions made by supervisors and subordinates regarding the primary process are therefore of great essence and must be strategically aligned. This is important as every day, supervisors and subordinates make decisions for operations (Boyer & McDermott, 1999).
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Figure 2 Research framework
The four decision areas by Slack & Lewis (2002) are capacity, supply network, process technology, and development and organisation. Decisions on capacity concern the potential level of productive activity over a certain period of time. Supervisors are expected to make long-term decisions and subordinates are expected to make short-term decisions. Decisions on supply networks incorporate the interconnectedness between entities such as supply chains, organisations, departments, and individuals. It is assumed that supervisors make long-term decisions regarding the interconnectedness between entities and that subordinates make short-term decisions regarding the interconnectedness between individuals. Decisions on process technology involve choices on the usage and development of systems, machines, and processes to transform resources into products/services. Supervisors are expected to make decisions on what technology is being used on the long-term, and operators on the short-term. Decisions on development and organisation concern process improvement practices, product/service development and human resources. It is assumed that supervisors make long-term decisions and that subordinates make short-term decisions. These decision areas provide the context to investigate the strategic alignment between supervisors and subordinates and the effect of the perceived interrelations.
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3. METHODOLOGY
3.1 Research design
The main purpose of this study was to identify how the perceived interrelations between performance dimensions influence strategic alignment between supervisors and subordinates. Supervisors and subordinates were interviewed to investigate strategic alignment and the perceived interrelations between performance dimensions (i.e. trade-offs, compatibilities). An inductive case study research was performed to investigate this relationship. A case study is most suitable for unexplored issues as it allows for an exploratory lens to answer questions on phenomena that are not completely understood, or where variables are unknown (Karlsson, 2009). Also, case studies can function as a basis for the development of surveys and experiments and are complementary to incremental theory building (Rowley, 2002). This research makes use of interpretivism (Punch, 2000), as behaviour and meanings that people bring to situations are studied. Thus, a case study is most appropriate for this research purpose.
3.2 Case selection
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General business information Primary process The supervisor The subordinate
Organisation A
Organisation A is a multinational which produces tires for different industries such as the automotive, bicycle and agricultural industry. Organisation A has 1700+ employees and an estimated annual revenue of 510 million euros. The headquarters is located in the
Netherlands.
The primary process of organisation A includes all operations in order to transform raw materials into end products. The primary process includes procurement of raw materials, logistics and various production processes to supply businesses and end customers with the specified tires. Process steps within the production process require operators to control heavy machinery.
The interviewed supervisor within organisation A is an Operations Manager (A1). A1 is responsible for the complete operation from raw materials to
inventory, which includes planning and production. A1 makes sure that the crew is present and that the planning is correct.
The interviewed subordinate within organisation A is an Operator (A2). A2 controls machinery and does that for different departments within the production process.
Organisation B
Organisation B is a multinational in healthcare and personal health. The department that was approached for the interviews focuses on personal health and more specifically, the production of shavers. Organisation B has 77,000+ employees and an estimated annual revenue of 18,1 billion euros. The department that was approached for the interviews is located in the Netherlands.
The primary process includes
procurement of raw materials, logistics and production processes to supply customers with the specified shavers. Shavers are made from resins, electronical components, and steel. Logistics and planning are very important for this department due to the efficient positioning of the customer order decoupling point.
The interviewed supervisor within organisation B is a Logistics Engineer and Planning Manager (B1). B1 supervises a team of three planners and seven logistics engineers. B1 is
responsible for the design of the factory in a logistics point of view and an optimal planning.
The interviewed subordinate within organisation B is a Logistics Engineer (B2). B2 oversees internal logistical activities and makes sure that the right materials are at the right place at the right time for a certain part within the factory.
Organisation C
Organisation C is a multinational which produces plastic pipe systems and solutions. Organisation C has 12,000+ employees and an estimated annual revenue of 1,2 billion euros. The headquarters is located in the Netherlands.
The primary process includes the procurement of raw materials, production processes and logistics to supply large distributors and building sites with their products. Procured raw materials include plastic granulate in order to produce pipes and fittings from all sizes and materials, such as PVC, PE and PP. The supply chain coordination is very important for organisation C as it has multiple production departments throughout Europe.
The interviewed supervisor within organisation C is a European Sales and Operations Manager (C1). C1 is responsible for sales and operations within Europe with the aim to standardize sales and operations processes across Europe.
The interviewed subordinate within organisation C is a Supply Chain Coordinator (C2). C2 is responsible for balancing the whole supply chain within a plant. Including stock levels, lot sizes, capacity loads of machines and the introduction of new products and phase out of old products.
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3.3 Data collection
Data was gathered through semi-structured interviews with supervisors and subordinates. Interviews were done via Skype. Each interview was recorded and transcribed. The interview guide is presented Appendix A. Interviews had an average length of between 35 and 50 minutes. For the exact duration per interview see table 2. Semi-structured interviews were chosen as they are suitable for small-scale research (Drever, 1995). Per organisation, two interviews have been conducted. One with a supervisor and one with a subordinate. It was important to gather enough information in order to fill in the operations strategy matrix by Slack & Lewis (2002), presented in figure 3. The operations strategy matrix of Slack & Lewis (2002) is used as it combines the decision areas and performance dimensions in order to get an overview of the operations strategy and to make comparisons between supervisors and subordinates. During the interviews, questions were asked per decision area about what strategic goals/performance dimensions the interviewee considers to be important.
Subsequently per decision area, questions concerning the interrelations between the mentioned strategic goals and corresponding performance dimensions were asked. Interviewees have been asked if he or she considers the strategic goals/performance dimensions to interrelate as trade-offs and/or as compatibilities. Each interviewee was asked to further elaborate on why certain performance dimensions are interrelated as indicated to study the underlying mechanisms. To prevent biased outcomes, the interviewees were not informed about each other’s results before both had been interviewed. After the interviews, results were evaluated by comparing answers from the supervisor and the subordinate of each organisation. By performing this study at three different organisations (A, B and C) with the aim for literal replication, it may reveal insights on the perceived interrelations of supervisors and subordinates and how it affects the strategic alignment.
3.4 Data analysis
Two operations matrices were filled in per organisation according to interview data. One matrix was filled in according to the interview with the supervisor, and one matrix was filled in according to the interview with the subordinate. Each operations matrix has 20 intersections (4 decision areas x 5 performance dimensions). Each intersection was considered based on interview data but were left blank when the intersection was considered to be unimportant. For the six operations matrices see Appendix B. After filling in the two matrices per organisation, the matrices were compared. The goal when comparing the two matrices was to determine elements of strategic alignment and strategic misalignment per decision area. Elements of strategic alignment and strategic misalignment were determined based on differences and similarities between the two operations matrices of each organisation. More
Interviewee A1 A2 B1 B2 C1 C2
Duration 40:24 35:10 49:10 43:39 45:40 48:11
12 specifically, per decision area elements of strategic alignment and strategic misalignment were determined based on which performance dimensions supervisors and subordinates find important and whether they find the same performance dimensions important or not.
Subsequently, a qualitative analysis was performed through coding to identify patterns on the interrelations between performance dimensions (Strauss & Corbin, 1990). A coding scheme has been constructed as suggested by Gioia, Corley & Hamilton (2012). Transcriptions were taken apart to identify concepts. Concepts have been grouped into sub-categories and sequentially into categories. During the coding process, it became clear that there were two possible concepts that function as the underlying mechanisms that may explain the perceived interrelations. Supervisors and subordinates formulated constraints and opportunities for improvement as the underlying mechanisms that explain the perceived interrelations. An excerpt of the coding tree for the within case analysis is presented in table 3. The final coding scheme is added as Appendix C.
After the within case analysis, a cross-case analysis of the data from the three organisations (A, B, C) was performed (Yin, 2009). As the within case analysis already involved comparison between supervisors and subordinates, the cross-case analysis consisted of a comparison of the within case analysis comparisons. For the cross-case analysis, data was organised based on the decision areas. Respectively, excerpts the comparisons of the operations matrices, comparisons of the perceived interrelations and comparisons of the underlying mechanisms are presented in table 4, 5 and 6. The excerpts only show the comparisons based on the decision area of process technology.
Figure 3 Operations strategy matrix by Slack & Lewis (2002)
Organisation Interviewee Decision area Perceived interrelation Constraint Opportunity
Capacity “It is difficult to organise a flexible production (flexibility) without increasing your costs (cost) (trade-off) . Especially because cost here in the Netherlands are high.
Production costs are very high in the Netherlands Supply
network
“Having a flexible production (flexibility) in order to produce tires from all ranges increases costs (cost) . However, it depends on customer demand how we fill in this balance (trade-off) , it depends on the return of investment if it is worth the changes”.
There is variety in customer demand Organisation A Supervisor
(A1)
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Supervisor (A1) Subordinate (A2) Supervisor (B1) Subordinate (B2) Supervisor (C1) Supervisor (C2)
Important performance
dimensions
Process technology
A1 makes decisions on what technology to invest in or what alterations to make to the process
if needed. In making these decisions, A1 considers cost,
quality and speed to be
important. “Process alterations should lead to producing exactly
what the customer requires, against low costs and in high quantities in order to achieve an
optimal ROI”.
A2 is involved in the decision-making process if there is a plan
on buying new equipment. In making these decisions, A2 finds
it important that new process technology allows for a high operational performance in terms
of quality and speed. However, according to A2, management sees this differently. “We got a new machine that did not fulfil our demands, even though we told them that we want to be able
to produce in larger volumes and make quality products. But this machine was cheaper and I think
that is why they bought it”.
B1 decides together with production managers on buying or upgrading new machines and software by giving them pros and cons from a logistics perspective. In making these decisions, B1 explains that flexibility and cost
are important. “We have a moulding machine and we have a
mould on there with a certain capacity. For me it is sometimes
easier to have a higher capacity on that machine to be more flexible as it makes planning and
logistics easier. However, there are certain costs that we must then take into account as well.”
B2 makes decisions on the logistical input for a software
program. In making these decisions, B2 explains that
flexibility and quality is
important. “We want to create an integral program that can be used by multiple departments. So that when you have a breakdown, all departments can see what is going on and that everybody can
understand the dashboard to improve their capabilities”.
C1 makes decisions together with others on investing in machinery. In making these decisions, C1 considers, sustainability and cost
to be important. "We want to increase output and reduce costs
by doing things smarter. For example, by integrating two parts
of a machine into one machine. Another strategic goal is that the
new technologies we develop should not only be an addition to
our production process, but it should also strive to reduce waste, to use less electricity, to
produce less carbon dioxide".
C2 makes decisions on providing the right information to higher
management to improve and replace existing software and machinery. In making these decisions, C2 describes that
dependability and quality are
important. “The machinery and software that is being used must be reliable so that those that work with it can do their work best and rely on the software as
well”.
Organisation A Organisation B Organisation C
Decision area
Supervisor (A1) Subordinate (A2) Supervisor (B1) Subordinate (B2) Supervisor (C1) Supervisor (C2)
Perceived interrelations between performance
dimensions
Process technology
“Nowadays there are machines that lead to automated processes which make it possible for us to produce more tires in less time
(speed), which are even stronger (quality). However, these
machines costs a lot of money
(cost). Therefore, it costs me
money (trade-off)".
“It would be nice to have a better machine available that allows for less standstill. With less standstill we can mix and extrude in large quantities (speed) while improving the quality (quality)
(compatibility)”.
"It is very conflicting because a machine that has multiple moulds to be more flexible (flexibility) will probably cost (cost) more
(trade-off) and then it depends
on the ROI whether we make the decision to buy the machine or not".
“If the software is more flexible
(flexibility), more people can use
it which leads to more data input and which improves the quality
(quality) of the data
(compatibility)".
“A sustainable (sustainability) machine requires a large investment (cost) as it is unfortunately still often the more expensive solution in terms of machinery. And that is then a trade-off (trade-off)".
"User friendly technology helps in the work of everyone in the process, which leads to a more consistent output (dependability) and improves the quality (quality) of the output (compatibility)".
Decision area Organisation A Organisation B Organisation C
Supervisor (A1) Subordinate (A2) Supervisor (B1) Subordinate (B2) Supervisor (C1) Supervisor (C2)
Underlying
mechanisms Process technology
Machines are only worth investing with a high ROI
(constraint) Less standstill (opportunity)
Flexible technology is expensive and is acquired depending on the ROI (constraint)
Flexible technology allows for more data input and improves the quality (opportunity)
Sustainable machinery is still the more expensive machinery (constraint)
User friendly technology improves work of others as well (opportunity)
Decision area Organisation A Organisation B Organisation C
Table 5 Excerpt of cross-case analysis of strategic alignment between supervisors and subordinates
Table 4 Excerpt of cross-case analysis of perceived interrelations
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3.5 Quality criteria
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4. FINDINGS
In this section, the within case analysis and the cross-case analysis are presented. The within case analysis presents the comparisons between supervisors and subordinates per organisation (A, B and C) based on three topics. First, the important performance dimensions as described by supervisors and subordinates are compared to investigate elements of strategic alignment and strategic misalignment. Secondly, the perceived interrelations between performance dimensions are compared. Thirdly, the underlying mechanisms are compared. The cross-case analysis describes differences and similarities across the organisations based on these three topics.
4.1 Within case analysis
4.1.1 Organisation A
For each decision area, the supervisor (A1) focuses on cost and describes interrelations as trade-offs. On the other hand, the subordinate (A2) focuses on performance dimensions other than cost and mainly formulates interrelations as compatibilities. The supervisor describes certain constraints that may explain trade-off interrelations whereas the subordinate addresses opportunities that explain compatible interrelations. An overview of the results of the supervisor – subordinate comparison of organisation A is presented in table 7.
Decision areas Supervisor (A1) Subordinate (A2) Organisation A outcome
(comparison A1 - A2)
Important performance
dimensions
Capacity Cost, flexibility Dependability, flexibility The supervisor (A1) has a focus on cost for each decision area whereas the subordinate (A2) does not (i.e. subordinate focuses on other the performance dimensions), which indicates an element of strategic misalignment. However, there is also an element of strategic alignment as the supervisor and subordinate do agree on at least one performance dimension per decision area.
Supply network Cost, flexibility Dependability, flexibility
Process
technology Cost, quality, speed Quality, speed Development &
organisation Cost, quality, speed Quality, safety*
Perceived interrelations
between performance
dimensions
Capacity Trade-off Compatibility
The supervisor (A1) describes trade-offs whereas the subordinate (A2) mainly defines compatibilities.
Supply network Trade-off Compatibility
Process
technology Trade-off Compatibility
Development &
organisation Trade-off Trade-off
Underlying mechanisms
Capacity Constraint: production costs are very high in the Netherlands Opportunity: maintain constant production
The supervisor (A1) describes constraints that may explain trade-off interrelations whereas the subordinate (A2) addresses opportunities that could explain compatible interrelations.
Supply network Constraint: there is variety in
customer demand
Opportunity: increase trust among colleagues
Process technology
Constraint: machines are only worth
investing with a high ROI Opportunity: less standstill
Development & organisation
Constraint: improvement experiments often fail
Constraint: workers have to get used to new safety standards
*not a classic performance dimension
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4.1.1.1 Important performance dimensions
The comparison of the important performance dimensions shows that the supervisor (A1) generally focuses on cost whereas the subordinate (A2) focuses on other performance dimensions, which indicates an element of strategic misalignment. However, the supervisor and the subordinate also tend to agree on one performance dimension per decision area, indicating an element of strategic alignment. For example, for the decision area of capacity, the supervisor mentions that "We want to be flexible
(flexibility) and produce the right products for the right costs (cost)". The subordinate addresses that “It is important that I first discuss with operators before and after me in the production process (dependability) if they are okay with it if I decide to change things in my production (flexibility). Otherwise they might not be able to cope with it”. This shows that the supervisor highlights cost whereas
the subordinate does not mention cost but addresses dependability, indicating an element of strategic misalignment. However, this also suggests that the supervisor and the subordinate both consider flexibility as an important performance dimension, indicating an element of strategic alignment.
4.1.1.2 Interrelations between performance dimensions
Generally, the supervisor (A1) describes trade-offs and the subordinate (A2) mentions compatibilities. More specifically, for three of the four decision areas (capacity, supply network, process technology), the supervisor describes trade-off interrelations whereas the subordinate formulates compatible interrelations. For example, for the decision area of capacity, the supervisor explains that there is a trade-off between flexibility and cost: “It is difficult to organise a flexible production (flexibility) without
increasing your costs (cost)”. The subordinate describes for the decision area of capacity that there is a
compatible interrelation between dependability and flexibility: “There is no downside of being flexible
(flexibility) and considerate (dependability) towards your colleagues, they also do that for me”. 4.1.1.3 Underlying mechanisms
The underlying mechanisms have been categorized as opportunities and constraints. The supervisor (B1) formulated constraints for improvement to explain trade-off interrelations between cost and other performance dimensions. The subordinate (C2) mostly addressed opportunities for improvement to explain compatible interrelations between performance dimensions other than cost. Examples are given based on the decision area of capacity. For this decision area, the supervisor highlighted cost and flexibility as important performance dimensions and described that there is a trade-off interrelation. When asked to further elaborate and explain, the supervisor described a constraint: "Production costs
are very high here the Netherlands”. For the same decision area, the subordinate highlighted
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4.1.2 Organisation B
For each decision area, the supervisor (B1) focuses on cost and describes interrelations as trade-offs. For two decision areas (supply network, process technology), the subordinate (B2) focuses on performance dimensions other than cost and formulates interrelations as compatibilities. The supervisor and the subordinate formulate certain constraints that explain trade-offs. The subordinate also addresses opportunities to explain compatibilities. An overview of the results of the supervisor – subordinate comparison of organisation B is presented in table 8.
Decision areas Supervisor (B1) Subordinate (B2) Organisation B outcome
(comparison B1 - B2)
Important performance
dimensions
Capacity Cost, flexibility Cost, dependability The supervisor (B1) has a focus on cost for each decision area whereas the subordinate (B2) describes that cost is only important for two of the four decision areas, indicating an element of strategic misalignment. However, there is also an element of strategic alignment as the supervisor and the subordinate agree on at least one performance dimension per decision area.
Supply network Cost, flexibility, dependability Dependability, speed
Process
technology Cost, flexibility Flexibility, quality Development &
organisation Cost, speed Cost, speed
Perceived interrelations
between performance
dimensions
Capacity Trade-off Trade-off
The supervisor (B1) highlights trade-offs whereas the subordinate (B2) mainly formulates compatibilities.
Supply network Trade-off Compatibility
Process
technology Trade-off Compatibility
Development &
organisation Trade-off Compatibility
Underlying mechanisms
Capacity Constraint: production flexibility negatively affects the ROI Constraint: extra capacity costs space and money
The supervisor (B1) formulates constraints that may explain trade-offs whereas the subordinate (B2) mentions opportunities that could explain compatibilities.
Supply network Constraint: production reliability is never 100% Opportunity: risks can be mitigated
Process technology
Constraint: flexible technology is expensive and is acquired depending on the ROI
Opportunity: flexible technology allows for more data input and improves the quality
Development & organisation
Constraint: the improvements people suggest are just a shift of work
Opportunity: walking routes can be designed more efficiently
Table 8 Findings organisation B
4.1.2.1 Important performance dimensions
The comparison of the performance dimensions shows that the supervisor (B1) generally focuses on cost and the subordinate (B2) focuses on other performance dimensions, indicating an element of strategic misalignment. However, the supervisor and the subordinate also tend to agree on at least one performance dimension per decision area, which indicates an element of strategic alignment. For example, for the decision area of supply network, the supervisor highlights that: “Production flexibility
18 subordinate points out that “Continuity (speed) and reliability (dependability) in are very important for
collaboration and production”. This shows that the supervisor highlights cost, flexibility and
dependability whereas the subordinate addresses dependability and speed. Thus, there is an element of strategic misalignment on cost, flexibility and speed. However, it also suggests that the supervisor and the subordinate both find dependability an important performance dimension, indicating an element of strategic alignment.
4.1.2.2 Interrelations between performance dimensions
Generally, the supervisor (B1) describes trade-offs and the subordinate (B2) formulates compatibilities. More specifically, for three of the four decision areas (supply network, process technology, development & organisation), the supervisor describes trade-off interrelations whereas the subordinate mentions compatible interrelations. For example, for the decision area of supply network, the supervisor explains that there is a trade-off between cost, dependability and flexibility: “Depending on the stability
(flexibility) of the production departments we determine the stock level in order not to hurt the customer (dependability) and keep costs (cost) low. And if you tweak one, the others are hit”. For the same
decision area, the subordinate describes that there is a compatible interrelation between dependability and speed: “If department A stalls (speed), then department B also has automatically nothing to do
(dependability)".
4.1.2.3 Underlying mechanisms
The underlying mechanisms have been categorized as opportunities and constraints. The supervisor (B1) formulated constraints for improvement that should explain trade-off interrelations between cost and other performance dimensions. The subordinate (B2) highlighted certain opportunities for improvement to explain compatible interrelations between performance dimensions other than cost. Examples are given based on the decision area of supply network. For this decision area, the supervisor highlighted that cost, flexibility and dependability are important performance dimensions and described that there is a trade-off interrelation. When asked to further elaborate and explain, the supervisor described a constraint: "Production reliability is never 100%”. The subordinate highlighted dependability and flexibility as important performance dimensions and addressed that there is a compatible interrelation. When asked to further elaborate and explain, the subordinate defined an opportunity for improvement:
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4.1.3 Organisation C
For each decision area, the supervisor (C1) focuses on cost and describes interrelations as trade-offs. For two decision areas (supply network, process technology), the subordinate (C2) focuses on performance dimensions other than cost and formulates interrelations as compatibilities. The supervisor and the subordinate describe certain constraints which may explain trade-off interrelations. Additionally, the subordinate describes opportunities that could explain compatible interrelations. An overview of the results of the supervisor – subordinate comparison of organisation C is presented in table 9.
Decision areas Supervisor (C1) Subordinate (C2) Organisation C outcome
(comparison C1 - C2)
Important performance
dimensions
Capacity Cost, service* Cost, dependability There are predominantly elements of strategic alignment as the comparison shows that the supervisor (C1) and the subordinate (C2) mainly find the same performance dimensions important per decision area, except for the decision area of process technology. Here the supervisor focuses on cost and sustainability whereas the subordinate focuses on dependability and quality, indicating an element of strategic misalignment.
Supply network Cost, flexibility Cost, flexibility
Process
technology Cost, sustainability* Dependability, quality Development &
organisation Cost, flexibility Cost, flexibility
Perceived interrelations
between performance
dimensions
Capacity Trade-off Trade-off
The supervisor (C1) highlights trade-offs whereas the subordinate (C2) describes trade-offs and compatibilities.
Supply network Trade-off Compatibility
Process
technology Trade-off Compatibility
Development &
organisation Trade-off Trade-off
Underlying mechanisms
Capacity Constraint: limited amount of resources (capacity constraints) Constraint: stock increases costs and decreases cash flow
The supervisor (C1) and the subordinate (C2) describe constraints that may explain trade-off interrelations. The subordinate also describes opportunities that could explain compatible interrelations.
Supply network Constraint: the ROI must be high Opportunity: collaboration between plants can reduce costs
Process technology
Constraint: sustainable machinery is still the more expensive machinery
Opportunity: user friendly technology improves work of others in the process as well
Development & organisation
Constraint: employee development projects are very expensive
Constraint: product margins are small and lead to a low willingness to invest *not a classic performance dimension
Table 9 Findings organisation C
4.1.3.1 Important performance dimensions
The comparison of the important performance dimensions described by the supervisor (C1) and the subordinate (C2) predominantly shows that the supervisor and the subordinate agree on the important performance dimensions, indicating an element of strategic alignment. However, there is an exception based on the decision area of process technology. Here the comparison of important performance dimensions shows that the supervisor focuses on cost and sustainability whereas the subordinate focuses on dependability and quality. The supervisor mentioned that “We want to increase output and reduce
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to our production process, but it should also strive to reduce waste, to use less electricity, to produce less carbon dioxide (sustainability)”. The subordinate addressed that “It is important that machinery and software that is being used is reliable (dependability) so that those who work with it can do their work best (quality)”. This shows that the supervisor focuses on cost and sustainability whereas the
subordinate focuses on dependability and quality, which indicates strategic misalignment based on the decision area of process technology.
4.1.3.2 Interrelations between performance dimensions
Generally, the supervisor (C1) describes trade-offs and the subordinate (C2) formulates compatibilities. More specifically, for two decision areas (supply network, process technology), the supervisor describes trade-off interrelations whereas the subordinate mentions compatible interrelations. For example, for the decision area of process technology, the supervisor explains that there is a trade-off between cost and sustainability: “A sustainable (sustainability) solution requires a large investment (cost) as it is very
expensive. And that is then a trade-off”. The subordinate describes that there is a compatible interrelation
between dependability and quality: "User friendly technology helps in the work of everyone in the
process, which leads to a more consistent output (dependability) and improves the quality (quality) of the output".
4.1.3.3 Underlying mechanisms
The underlying mechanisms have been categorized as opportunities and constraints. The supervisor (C1) formulated certain constraints for improvement that may explain trade-off interrelations between cost and other performance dimensions. The subordinate (C2) highlighted certain opportunities for improvement to explain compatible interrelations between performance dimensions other than cost. Examples are described based on the decision area of process technology. For this decision area, the supervisor highlighted that cost and sustainability are important performance dimensions and that there is a trade-off interrelation. When asked to further elaborate and explain, the supervisor described a constraint: "Sustainable machinery is often still the more expensive solution in terms of machinery”. The subordinate highlighted dependability and flexibility as important performance dimensions and addressed that there is a compatible interrelation. When asked to further elaborate explain, the subordinate defined an opportunity for improvement: “By collaborating we can reduce our inventory
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4.2 Cross-case analysis
The outcomes of the within case analyses are compared to describe patterns across the organisations A, B and C. The main findings of the cross-case analysis suggest that supervisors focus on cost and perceive interrelations as trade-offs because they consider constraints. On the other hand, subordinates focus on performance dimensions other than cost and perceive interrelations as compatibilities because they consider opportunities. A general overview of the comparison and main findings is presented in table 10. Respectively, in the paragraphs 4.2.1, 4.2.2 and 4.2.3 a deeper analysis and explanation is provided of the important performance dimensions, the perceived interrelations, and the underlying mechanisms. Tables are added for a detailed overview of the outcomes of the organisations.
Organisation A outcome (comparison A1 - A2) Organisation B outcome (comparison B1 - B2) Organisation C outcome (comparison C1 - C2) Cross-case analysis outcome Important performance dimensions
The supervisor (A1) has a focus on cost for each decision area whereas the subordinate (A2) does not (i.e. subordinate focuses on other the performance dimensions), which indicates an element of strategic misalignment. However, there is also an element of strategic alignment as the supervisor and subordinate do agree on at least one performance dimension per decision area.
The supervisor (B1) has a focus on cost for each decision area whereas the subordinate (B2) describes that cost is only important for two of the four decision areas, indicating an element of strategic misalignment. However, there is also an element of strategic alignment as the supervisor and the subordinate agree on at least one performance dimension per decision area.
There are predominantly elements of strategic alignment as the comparison shows that the supervisor (C1) and the subordinate (C2) mainly find the same performance dimensions important per decision area, except for the decision area of process technology. Here the supervisor focuses on cost and sustainability whereas the subordinate focuses on dependability and quality, indicating an element of strategic misalignment.
Within the organisations A, B and C, supervisors and subordinates agree on (at least) one important performance dimension per decision area, indicating a common element of strategic alignment. However, there is also a common element of strategic misalignment as supervisors tend to focus on cost whereas subordinates focus on other performance dimensions. Perceived interrelations between performance dimensions
The supervisor (A1) describes trade-offs whereas the subordinate (A2) mainly defines compatibilities.
The supervisor (B1) highlights trade-offs whereas the subordinate (B2) mainly formulates compatibilities.
The supervisor (C1) highlights trade-offs whereas the subordinate (C2) describes trade-offs and compatibilities.
Within the organisations A, B and C, supervisors describe trade-offs, whereas
subordinates mainly formulate compatibilities.
Underlying mechanisms
The supervisor (A1) describes constraints that may explain trade-off interrelations whereas the subordinate (A2) addresses opportunities that could explain compatible interrelations.
The supervisor (B1) formulates constraints that may explain trade-offs whereas the subordinate (B2) mentions opportunities that could explain compatibilities.
The supervisor (C1) and the subordinate (C2) describe constraints that may explain trade-off interrelations. The subordinate also describes opportunities that could explain compatible interrelations.
Within the organisations A, B and C, supervisors and subordinates describe constraints that may explain trade-off interrelations. Subordinates also define opportunities that could explain compatible interrelations.
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4.2.1 Important performance dimensions
Within the organisations A, B and C, supervisors and subordinates mostly agree on (at least) one important performance dimension per decision area, indicating a common element of strategic alignment. However, there is also a common element of strategic misalignment as supervisors tend to focus on cost whereas subordinates focus on performance dimensions other than cost (i.e. quality, speed, dependability, flexibility). Table 11 is constructed to visualize the comparison on important performance dimensions between supervisors and subordinates per organisation.
Decision areas
Organisation A Organisation B Organisation C
Supervisor (A1) Subordinate (A2) Supervisor (B1) Subordinate (B2) Supervisor (C1) Subordinate (C2) Important performance dimensions
Capacity Cost, flexibility Dependability, flexibility Cost, flexibility Cost, dependability Cost, service* Cost, dependability
Supply network Cost, flexibility Dependability, flexibility Cost, flexibility, dependability Dependability, speed Cost,
flexibility Cost, flexibility
Process technology
Cost, quality,
speed Quality, speed
Cost, flexibility Flexibility, quality Cost, sustainability* Dependability, quality Development & organisation Cost, speed,
quality Quality, safety* Cost, speed Cost, speed
Cost,
flexibility Cost, flexibility
Table 11 Detailed overview of the important performance dimensions
4.2.2 Interrelations between performance dimensions
Within the organisations A, B and C, supervisors describe trade-offs, whereas subordinates mainly formulate compatibilities. There are exceptions as subordinates also described trade-off interrelations. Interestingly, for three of the four cases where subordinates described trade-offs, they addressed cost as an important performance dimension. Like supervisors, as supervisors also addressed trade-offs and had a focus on cost. This suggests that whenever supervisors or subordinates consider cost as an important performance dimension, it is likely that they perceive trade-off interrelations between cost and other performance dimensions. The other way around, it may also suggest that if supervisors perceive trade-off interrelations, they mainly focus on cost.
23 Decision
areas
Organisation A Organisation B Organisation C
Supervisor (A1) Subordinate (A2) Supervisor (B1) Subordinate (B2) Supervisor (C1) Subordinate (C2) Perceived interrelations between performance dimensions
Capacity Trade-off Compatibility Trade-off Trade-off Trade-off Trade-off
Supply
network Trade-off Compatibility Trade-off Compatibility Trade-off Compatibility Process
technology Trade-off Compatibility Trade-off Compatibility Trade-off Compatibility Development
&
organisation
Trade-off Trade-off Trade-off Compatibility Trade-off Trade-off
Table 12 Detailed overview of the perceived interrelations
4.2.3 Underlying mechanisms
The underlying mechanisms have been categorized as opportunities and constraints for improvement. Within the organisations A, B and C, supervisors and subordinates described certain constraints to explain trade-off interrelations. However, subordinates also define certain opportunities that should explain compatible interrelations. The underlying mechanisms have been categorized as opportunities and constraints as they have the character of constraints and opportunities for improvement. Table 13 is constructed to visualize the comparison on the underlying mechanisms as addressed by the supervisors and subordinates per organisation.
Decision areas
Organisation A Organisation B Organisation C
Supervisor (A1) Subordinate (A2) Supervisor (B1) Subordinate (B2) Supervisor (C1) Subordinate (C2) Underlying mechanisms Capacity Constraint: production costs are very high in the Netherlands Opportunity: maintain constant production Constraint: production flexibility negatively affects the ROI Constraint: extra capacity costs space and money Constraint: limited amount of resources (capacity constraints) Constraint: stock increases costs and decreases cash flow Supply network Constraint: there is variety in customer demand Opportunity: increase trust among colleagues Constraint: production reliability is never 100% Opportunity: risks can be mitigated Constraint: the ROI must be high Opportunity: collaboration between plants can reduce costs
Process technology Constraint: machines are only worth investing with a high ROI Opportunity: less standstill Constraint: flexible technology is expensive and is acquired depending on the ROI Opportunity: flexible technology allows for more data input and improves the quality
Constraint: sustainable machinery is still the more expensive machinery Opportunity: user friendly technology improves work of others in the process as well Development & organisation Constraint: improvement experiments often fail Constraint: workers have to get used to new safety standards
Constraint: the improvements people suggest are just a shift of work Opportunity: walking routes can be designed more efficiently Constraint: employee development projects are very expensive Constraint: product margins are small and lead to a low willingness to invest
24 Additionally, opportunities and constraints for improvement have been compared to find commonalities within these underlying mechanisms. Interestingly, each supervisor (A1, B1, C1) addressed the ROI as a constraint that possibly explains certain trade-offs. For example, for the decision area of supply network, supervisor C1 describes the ROI as a constraint that may explain the trade-off interrelation between flexibility and cost. For the decision area of supply network, C1 considers flexibility and cost to be important: ”In making the decision who gets which portion of our goods, it is important that we
are flexible in allocating those goods because growth potential can change quickly per region. But not too flexible as we also need a certain level of standardization to reduce costs and complexity”. When
asked about the interrelation between cost and flexibility, supervisor C1 defines a trade-off interrelation:
“It is a trade-off (trade-off) that is made per region, standardization (cost) against flexibility (flexibility). For example, there are decisions to be made on the centralization or decentralization of certain processes. When asked to further elaborate and explain why this interrelation exists, supervisor C1
described a constraint: “We must make decisions whether to centralize or to decentralize certain
processes. Otherwise there would be no sustainable business in terms of ROI”. Similarly, supervisors
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5. DISCUSSION
Supervisors and subordinates may focus on different performance dimensions and perceive different interrelations which can be explained through different underlying mechanisms. In terms of strategic alignment, supervisors often have a focus on cost whereas subordinates tend to focus on performance dimensions other than cost (i.e. quality, speed, dependability, flexibility). Supervisors may generally focus on cost because they perceive trade-off interrelations. Subordinates may generally focus on performance dimensions other than cost because they perceive compatible interrelations. The underlying mechanisms that explain these differences are that supervisors consider constraints for improvement whereas subordinates consider opportunities for improvement. An expanded model of the initial research framework is presented in figure 4 to visualize these propositions. Following up, theory is used to further explain the findings on the important performance dimensions, the perceived interrelations, and the underlying mechanisms. Propositions are made per topic.
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5.1 Important performance dimensions
Supervisors may generally have a focus on cost whereas subordinates tend to focus on other performance dimensions (i.e. quality, speed, dependability, flexibility), which indicates of a common element of strategic misalignment. Edh Mirzaei, Fredriksson & Winroth (2016) support this outcome as they described that individuals working in the intra-organisational upper level focus more on cost reduction whereas individuals working on an operational level focus more on operational performance. In addition, Edh Mirzaei, Fredriksson & Winroth (2016) describe that this is not only due to disagreements, but also because of a limited awareness as people find it easier to perceive what is close to them than what is distant. In the case of supervisors, they may focus more on cost as their work includes decision-making on investments and generating income. In the case of subordinates, they might focus more on performance dimensions other than cost as they are in closer contact with the output of the organisation and the production process. Therefore, the following is proposed:
Proposition 1. There is a common element of strategic misalignment between supervisors and
subordinates as supervisors generally focus on cost whereas subordinates focus on other performance dimensions (i.e. quality, speed, dependability, flexibility).
5.2 Interrelations between performance dimensions
Supervisors perceive trade-off interrelations whereas subordinates perceive compatible interrelations. More specifically, supervisors perceive trade-off interrelations between cost and other performance dimensions whereas subordinates perceive compatible interrelations between performance dimensions other than cost. That supervisors perceive trade-off interrelations between cost and other performance dimensions is supported as da Silveira (2005) described that in practice trade-offs mainly exist between cost and the other performance dimensions (i.e. quality, speed, dependability, flexibility). Thus, a focus on cost leads to perceiving trade-offs and vice versa. That subordinates perceive compatible interrelations between performance dimensions other than cost, might also be supported as Avella, Vazquez-Bustelo & Fernandez (2011) describe that in practice it is hardly ever the case that improvements on one performance dimension is planned to occur at the expense of another. Thus, a focus on performance dimensions other than cost leads to perceiving compatibilities. Accordingly, the following propositions are made:
Proposition 2. The perceived interrelations influence strategic alignment between supervisors
and subordinates and vice versa.
Proposition 2a. Supervisors perceive trade-offs whereas subordinates perceive
compatibilities.
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Proposition 2c. Perceiving compatibilities lead to a focus on performance dimensions
other than cost and vice versa.
5.3 Underlying mechanisms
Considered constraints and opportunities for improvement function as the underlying mechanisms that explain the perceived interrelations by supervisors and subordinates. More specifically, supervisors may perceive trade-offs because they consider constraints for improvement, whereas subordinates perceive compatibilities because they consider opportunities for improvement. For example, a supervisor described that there is a trade-off interrelation between cost and flexibility for the decision area of supply network. When asked to explain this trade-off interrelation, the supervisor addressed that this interrelation exists because there is a ROI that must be high. In other words, a low ROI was described as a constraint that impedes the improvement on both performance dimensions at the same time. On the other hand, a subordinate from the same organisation described that there is a compatible interrelation between cost and flexibility for the decision area of supply network. When asked to explain this compatible interrelation, the subordinate mentioned that this interrelation exists because plants can collaborate to reduce cost and improve flexibility. In other words, collaboration between plants is described as an opportunity that allows for the improvement on both performance dimensions at the same time.
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Proposition 3. The considered constraints and opportunities for improvement function as the
underlying mechanisms that explain the perceived interrelations by supervisors and subordinates.
Proposition 3a. Supervisors consider constraints for improvement (which refers to the
performance frontier) whereas subordinates consider opportunities for improvement (which refers to the sand cone model).
Proposition 3b. The considered constraints for improvement function as the
underlying mechanisms that explain the perceived trade-offs.
Proposition 3c. The considered opportunities for improvement function as the
underlying mechanisms that explain the perceived compatibilities.
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6. CONCLUSION
6.1 Theoretical implications
This study aimed at answering the research question which is What is the effect of the perceived
interrelations between performance dimensions on strategic alignment between supervisors and subordinates? The answer is that supervisors and subordinates often perceive different interrelations
which may cause them to focus on different performance dimensions, influencing strategic alignment. More specifically, supervisors perceive trade-offs which may cause them to focus on cost whereas subordinates perceive compatibilities which may cause them to focus on performance dimensions other than cost (i.e. quality, speed, dependability, flexibility). As has been addressed in the introduction, this study investigated what the causes are for individuals to perceive different interrelations (i.e. trade-offs, compatibilities). The causes for individuals to perceive different interrelations have been described as the underlying mechanisms. The underlying mechanisms are that supervisors consider constraints for improvement (referring to the performance frontier perspective) whereas subordinates consider opportunities for improvement (referring to the sand cone model). These different considerations may explain why supervisors and subordinates perceive different interrelations, causing a focus on different performance dimensions and thus influencing strategic alignment.
6.2 Managerial implications
The findings suggest that there is a common element of strategic misalignment between supervisors and subordinates. Supervisors tend to focus on cost whereas subordinates focus on performance dimensions other than cost. Kellermanns et al. (2005) emphasize that a mutual understanding is at the core of strategic alignment. Thus, to improve strategic alignment, it is important that supervisors and subordinates perceive the same interrelations between performance dimensions (i.e. trade-offs or compatibilities). To achieve this, it is important that supervisors and subordinates must also consider similar constraints and opportunities for improvement. It is therefore recommended that supervisors and subordinates discuss performance dimensions, interrelations, and underlying mechanisms (i.e. constraints and opportunities for improvement) to improve strategic alignment.
6.3 Limitations
30 Another limitation is described due to current circumstances concerning the COVID-19 outbreak, as most of the data collection for this study has been done during the peak of the outbreak. When asking about examples of decisions and strategic goals, interviewees may focus on strategic goals that are now relevant due to the COVID-19 outbreak. This might have led to individuals focusing more on cost reduction as a strategic goal as businesses are consolidating. Meaning that the COVID-19 situation might have partially influenced the findings that describe that supervisors focus on cost whereas subordinates focus on performance dimensions other than cost.
6.4 Future research
A common constraint for improvement (as suggested by supervisors) has been found, which is the ROI. However, a common opportunity for improvement (as suggested by subordinates) has not been established and remains inconclusive. For future research it might be interesting to further investigate commonalities between constraints and opportunities. More specifically, what are the exact characteristics of constraints and opportunities of improvement that determine whether performance dimensions might interrelate as trade-offs or as compatibilities?
