Strategic Priorities and Organizational Design

Abstract

ABSTRACT This paper examines how relations among organizational design choices (subjective performance evaluation, delegation, incentive intensity) vary with strategic priorities. In particular, I examine firms' organizational designs when multiple strategies are followed and managers need to be incentivized to make strategy-consistent decisions balancing different, partially opposing objectives. Analyzing survey data from 151 firms, I find support for my predictions: subjective performance measurement and incentive intensity are complements for firms following a low cost and a differentiation strategy simultaneously. In contrast, and in line with prior literature, incentive intensity has a substitutive relation with both subjective weighting and discretion for firms following a one-dimensional strategy. The relation between delegation and subjectivity or incentive intensity does not vary systematically across strategic priorities. My findings suggest that firms couple subjective performance measurement and incentive intensity to address the challenge of incentivizing balanced actions when a low cost and a differentiation strategy are followed simultaneously.