Strategic Consensus and Manufacturing Performance

Abstract

Researchers have long been interested in the nature of the relationships that elicit superior firm performance. In organizations that manufacture a product, this interest has often centered on the relationships that exist between business-level strategy and the supporting elements of the organization's manufacturing strategies (Buffa, 1984; Hayes & Wheelwright, 1984; Hill, 1985). An aspect of this relationship that has been studied concerns the presence of consensus between SBU-level and manufacturing-level decision makers. This research examines the causal nature of direct and indirect influences that have been argued in the literature to affect manufacturing performance. Our results indicate that consensus on the firm's business-level strategy does not directly influence manufacturing performance, but does so through its influences on other variables. Consensus with respect to manufacturing specific tasks that support the firm's business-level strategy was shown to be important. Additional findings in our research concern the relationship of traditional product-process alignment and levels of manufacturing performance. THEORETICAL FOUNDATION Managerial Consensus: Strategic and Manufacturing Task Consensus A major theme of the literature in strategic management and operations strategy is that consensus on the general strategic direction of the firm and on manufacturing task emphasis must exist between business-level strategic planners and functional-level manufacturing managers for effective business unit performance to occur. It is the responsibility of the manufacturing manager to develop a manufacturing strategy that supports the overall business-unit strategy (Schroeder et al., 1986). Operations scholars have warned that a manufacturing business unit will have a decreased competitive advantage within its industry if it fails to develop a coordinated and supportive operations strategy (Buffa, 1984; Hayes and Wheelwright, 1984; Hill, 1985). A good deal of research has examined the notion of consensus as it relates to the management process (Bourgeois, 1980; Dess, 1987; Schweiger and Sandberg, 1988; Wooldridge and Floyd, 1989; West and Schwenk, 1996; Homburg et al., 1999). As pointed out by Floyd and Wooldridge (1992), senior managers often complain that middle- and operating-level managers fail to take the correct actions to implement strategy. These implementation problems are deemed to be the result of middle-level and operating managers' lack of understanding of and/or commitment to the chosen strategy. Guth and MacMillan (1986) found that middle-level managers will not only redirect a strategy and delay its implementation, but will also sabotage the strategy if they feel their self-interest is being compromised. Other research has examined the relationship of consensus to performance. Wooldridge and Floyd (1990) found that the involvement of middle-level managers in the formation of business-level strategy was associated with improved organizational performance. St. John et al., (1991) examined the relationships among various coordinating mechanisms, the degree of consensus between marketing and manufacturing groups, and marketplace performance reputation. They found firms using planning techniques experienced higher levels of interdepartmental consensus and this was related strongly to marketplace performance reputation. The notion that manufacturing managers should develop a manufacturing strategy that supports the business-level strategy is consistent with the strategic management paradigm. A specific business-level strategy is formulated for the strategic business unit (SBU) in order to create a competitive advantage, and manufacturing managers are expected to translate this strategy into appropriate manufacturing performance goals, processes, and systems. An issue of concern during this process is the extent to which consensus is developed between managers at the SBU level and managers at the manufacturing level with respect to the overall competitive strategy chosen for the business unit. …

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