Short-Term Bias and Strategic Misalignment in Operational Solutions: Perceptions, Tendencies, and Traps

59 Pages Posted: 20 May 2015 Last revised: 9 Jun 2015

Rick Hardcopf

University of Minnesota - Twin Cities, Carlson School of Management, Students

Paulo Gonçalves

Institute of Management, Università della Svizzera italiana (USI, Lugano); Massachusetts Institute of Technology (MIT) - Sloan School of Management - Operations Management and System Dynamics

Kevin Wayne Linderman

University of Minnesota - Twin Cities - Department of Operations and Management Science

Elliot Bendoly

The Ohio State University

Date Written: March 31, 2015

Abstract

In this study we leverage a multi-method approach to examine the following questions: when faced with explicit profit gaps, are firms more likely to feel pressure to pursue certain short-term tactical options over others, how much does a firm’s strategic orientation influence perceptions regarding these tactical options, and what implications do tactical mismatches with strategy have for long-term gap resolution? We start by examining cases where the tactical choices of managers facing profit gap pressures led to both successful and less successful scenarios. These case examinations form the basis of a grounded systems development model. By way of this model we further consider the complex and dynamic paths through which cost cutting, product innovation and customer satisfaction tactics can ostensibly impact a firm’s profit gap. Incorporated in our considerations are implications regarding disproportionate effort allocations into tactics not aligned with a firm’s dominant strategy. Our arguments draw on theory from the system dynamics (SD) literature relating to causal ambiguity, feedback delays, and short-term biases. Two surveys are administered to gather perceptions regarding the clarity of connections between tactical activity and performance effects, and the extent to which managers feel pressure to pursue such tactics. The surveys also provide initial parameter estimates for formal system dynamics simulations (in Vensim) of the grounded model. Initial evaluation confirms the critical role of perceived pressure on managers to take short-term actions when faced with profit gap challenges – actions that ultimately drive dynamics in the grounded system model. The Vensim simulation results are regressed on levels of tactical-strategic misalignment extracted from associated survey data, showing anticipated short-term benefits and long-term costs of misalignment. The implications emphasize the tendency for Product Leadership and Customer Intimacy focused firms to be particularly susceptible to short-term profit gap traps.

Keywords: System dynamics, Strategy, Short-term, Tactics

Suggested Citation

Hardcopf, Rick and Gonçalves, Paulo and Linderman, Kevin Wayne and Bendoly, Elliot, Short-Term Bias and Strategic Misalignment in Operational Solutions: Perceptions, Tendencies, and Traps (March 31, 2015). Humanistic Management Network, Research Paper Series No. 19/15. Available at SSRN: https://ssrn.com/abstract=2587998 or http://dx.doi.org/10.2139/ssrn.2587998

Rick Hardcopf

University of Minnesota - Twin Cities, Carlson School of Management, Students ( email )

Minneapolis, MN
United States

Paulo Gonçalves

Institute of Management, Università della Svizzera italiana (USI, Lugano) ( email )

Via Giuseppe Buffi, 13
Lugano, CH-6904
Switzerland
+41 (0)58 666 44 79 (Phone)
+41 (0)58 666 46 47 (Fax)

HOME PAGE: http://web.mit.edu/~paulopg/www/

Massachusetts Institute of Technology (MIT) - Sloan School of Management - Operations Management and System Dynamics ( email )

30 Wadsworth St. E53-339
Cambridge, MA 02142
United States

HOME PAGE: http://web.mit.edu/~paulopg/www/

Kevin Wayne Linderman

University of Minnesota - Twin Cities - Department of Operations and Management Science ( email )

Minneapolis, MN 55455
United States

Elliot Bendoly (Contact Author)

The Ohio State University ( email )

Fisher College of Business
2100 Neil Ave
Columbus, OH 43212
United States

HOME PAGE: http://www.bizbreed.com

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