Performance feedback and middle managers’ divergent strategic behavior: The roles of social comparisons and organizational identification

• Author: Bill Wooldridge,Yoojung Ahn,Murat Tarakci,Nüfer Yasin Ateş,Steven W. Floyd
• Date: 01 April 2018
• Published date: 01 April 2018
• DOI: http://doi.org/10.1002/smj.2745

RESEARCH ARTICLE

Performance feedback and middle managers’

divergent strategic behavior: The roles of social

comparisons and organizational identification

Murat Tarakci

1

| Nüfer Yasin Ates¸

2,3

| Steven W. Floyd

4

| Yoojung Ahn

5

|

Bill Wooldridge

4

1

Rotterdam School of Management, Erasmus

University, Rotterdam, Netherlands

2

Faculty of Business Administration, Bilkent

University, Ankara, Turkey

3

Tilburg School of Economics and Management,

Tilburg University, Tilburg, Netherlands

4

Isenberg School of Management, University of

Massachusetts Amherst, Amherst, Massachusetts

5

College of Business, City University of Hong

Kong, Kowloon Tong, Hong Kong

Correspondence

Murat Tarakci, Rotterdam School of Management,

Erasmus University, Burgemeester Oudlaan 50,

Rotterdam, 3062 PA, The Netherlands.

Email: tarakci@rsm.nl

Research Summary: What drives middle managers to

search for new strategic initiatives and champion them to

top management? This behavior—labeled divergent stra-

tegic behavior—spawns emergent strategies and thereby

provides one of the essential ingredients of strategic

renewal. We conceptualize divergent strategic behavior as

a response to performance feedback. Data from 123 senior

middle managers overseeing 21 multi-country organiza-

tions (MCOs) of a Fortune 500 firm point to social per-

formance comparisons rather than historical comparisons

in driving divergent strategic behavior. Moreover, man-

agers’organizational identification affects whether they

attend to organizational- or individual-level feedback.

These results contribute to research on performance aspi-

rations and strategy process by providing a multilevel,

multidimensional framework of performance aspirations

in middle management driven strategic renewal.

Managerial Summary: Middle managers are essential

actors in strategic renewal. Their unique positions offer

insights into operations alongside knowledge of strategy.

In contrast to typical assessments of managerial perfor-

mance with reference to a prior year, this research shows

that performance comparisons relative to peers and other

organizational units better motivate managers’divergent

strategic behavior. Our results also show that managers

who identify with the firm are more attentive to organiza-

tional rather than individual performance discrepancies.

Thus, our study unveils an important approach for organi-

zations aiming to spark strategic renewal.

Received: 11 November 2016 Revised: 23 October 2017 Accepted: 24 October 2017 Published on: 22 January 2018

DOI: 10.1002/smj.2745

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution

and reproduction in any medium, provided the original work is properly cited.

© 2017 The Authors. Strategic Management Journal published by John Wiley & Sons, Ltd.

Strat Mgmt J. 2018;39:1139–1162. wileyonlinelibrary.com/journal/smj 1139

KEYWORDS

behavioral strategy, middle managers, performance

aspirations, strategic renewal, strategic roles, strategy

process

1|INTRODUCTION

Research on the behavioral theory of the firm (BTF) has shown that managers search for and initiate

new ways to improve organizational performance when it falls below aspiration levels (e.g., Baum,

Rowley, Shipilov, & Chuang, 2005; Cyert & March, 1963; Greve, 1998, 2003a; Harris & Bromiley,

2007; Kacperczyk, Beckman, & Moliterno, 2015; for a review see Shinkle, 2012). While this litera-

ture has added insight into when and why firms pursue strategic change, it has not unbundled and

examined contingencies associated with the type and level of performance feedback that managers

attend to. For example, while Cyert and March (1963) have distinguished historical aspiration levels

(a firm’s recent performance relative to its own past) and social aspiration levels (performance rela-

tive to that of other firms), empirical research has tended to aggregate these two reference points

(Bromiley & Harris, 2014; Washburn & Bromiley, 2012). In addition, past studies have mainly

focused on organizational performance feedback. Still, managers receive, and likely heed, feedback

about both the organization’s and their own individual performances. Finally, while prior research

agrees that poor performance produces search, it lacks consensus as to the effects of performance

feedback above aspiration levels (e.g., Greve, 2003a; O’Brien & David, 2014).

To address these research gaps, this study extends the BTF by drawing a broader picture of how

different types of aspiration (i.e., historical or social), the direction of the performance discrepancy

(i.e., above or below aspirations) and its level (i.e., organizational- or individual-level) all influence

managerial behavior. To this aim, we deliberately focus on middle managers. While middle managers

run particular units and receive feedback on unit performance, they are also subject to performance

systems that regularly provide feedback at the individual level, affecting bonuses and promotions.

1

Middle managers also lie at the heart of strategic renewal (Floyd & Lane, 2000; Wooldridge & Floyd,

1990; Wooldridge, Schmid, & Floyd, 2008). They bring leadership to the strategy process by search-

ing for new strategic initiatives beyond the boundaries of current strategy that we define here as diver-

gent strategic behavior (Floyd & Lane, 2000; Floyd & Wooldridge, 1992). Search in the form of

divergent strategic behavior helps organizations overcome inertia and achieve real and lasting strategic

change (e.g., Ahearne, Lam, & Kraus, 2013; Floyd & Lane, 2000; Wooldridge et al., 2008).

We develop and test hypotheses suggesting that social aspirations are more important drivers of

divergent strategic behavior than historical aspirations. This is because performance feedback on social

aspirations leaves less room for self-enhancing interpretations justifying poor performance while boosting

managerial self-esteem and self-efficacy when performance exceeds social aspirations. We further posit

1

Dual-level performance feedback combined with their role in strategy process differentiates middle managers from top managers and

operating managers. Top managers’performance, for instance, is more likely to coincide with the organization’s performance, thereby

blurring the multilevel distinction we are trying to study. At the lower levels, operating managers are less driven by performance feed-

back to engage in search activity with strategic implications. We elaborate on the generalizability of our theory regarding top and

lower-level managers in the discussion section.

1140 TARAKCI ET AL.