Measuring Organizational Performance in the Absence of Objective Measures: The Case of the Privately-Held Firm and Conglomerate Business Unit

Abstract

A firm's organizational performance (OP) is often scrutinized when studying various organizational phenomena. When examining OP, researchers must provide a conceptualization to define it and must identify measures needed to operationalize OP. However, the identification of accurate performance measures is a challenge for not only privately-held firms but also for individual business units within conglomerates. To gain a more accurate understanding of OP, this research utilizes subjective and objective measures for both return on assets and sales growth. A sample of firms in the paints and allied products industry (n=18) participated in the three-phase data collection process, which was structured as listed: phase one consisted of on-site interviews; phase two utilized a 10-page questionnaire; and phase three used a one-page OP questionnaire. The data from the interviews and questionnaires were combined with other subjective and objective firm measures, including data from Morris Associates Annual Statement Studies. After analyzing both subjective management perceptions of organizational performance and objective measures (return on assets and sales growth), the findings indicate that the perceptions of the firm's management team are often consistent with actual firm performance. Thus, in the absence of objective measures of OP, researchers may find the subjective perceptions of a firm's management team to be adequate. Additionally, the research indicates implications related to the operationalization of OP for policy research, including the use of subjective measures as aids in operationalizing OP and the existence of an overlap between global measures of OP and other measures of OP. (AKP)

Keywords: Business conglomerates, Managers, Firm performance, Private firms, Research methods, Perceptions, Sales growth, Return on investment