Formal Strategic Analyses and Organizational Performance: Decomposing the Rational Model

Abstract

Although a substantial body of literature suggests a positive relationship between decision process rationality and organizational performance, there is also compelling evidence that this relationship is negative. We argue that these equivocal findings may be due, in part, to a lack of construct specificity and different methodologies employed to assess decision process rationality. Drawing from Langley's (1989) framework of decision process rationality, we examined the effects of formal analysis for purposes of information, persuasion and communication, control and direction, and symbolism, considering also their effects in the context of environmental dynamism. Using survey data from top management teams in 42 organizations, we found that in both high and low dynamism environments, the instrumental use of information in decision processes was positively linked with organizational performance. In dynamic environments, while analyses for symbolic and control purposes were positively associated with performance, analysis for persuasion was negatively associated with performance. By unraveling the performance effects of different elements of decision-making rationality, we can better understand the nature of relationships between strategic decision processes and organizational performance. This understanding might ultimately lead to better strategic decision making in organizations.