Eddielogic

– Thoughts on Strategy and Management

The impact of cognitions on strategy formation

| 0 comments

The financial turmoil and its different levels of regulatory gaps and organizational mismanagement have caused several questions regarding general management education, risk and profit orientation as well as personal and corporate ethics. In some discussions I have observed the opinion, that changing management education would represent a sufficient and simple way to improve corporate governance and organizational ethics. I would like to agree to a certain level and cannot deny the impact of education on personal behaviour, but unfortunately it is not that simple. May be you can remember two managers that have received the same education (i.e. the same college, the same business school) but show very different behaviour in managing the organization. The key to those differences can be found in different cognitions by individuals and by teams.

In order to analyse personal cognitions, the previous scientific research placed an emphasis on top managers. FORBES and MILLIKEN (1999) assume the dominant actors among this group. To identify cognitive attitudes and to come to a conclusion about strategies HAMBRICK and MASON (1984) employ indirect indicators, i.e.

  • age,
  • training,
  • past career, and
  • General conditions.

As one can see, “training” represent only one impact factor. Other research studies focus on directive cognitive attitudes and use an approach of cognitive maps. CALORI, JOHNSON and SARNIN (1994) see a significant positive correlation between organizational size and top managers cognitive map.

 

To explain collective phenomenon, other research studies analyse cognitive differences between different management levels. HAMBRICK (1981) argues that top manager have a higher awareness for a specific strategy compared to managers in the second or third hierarchy level. Top managers perceptions are also more in line with those of external observers; adverse to this more differences can be found between external observers and managers in upper management levels. BARR, STIMPERT and HUFF (1992) stress the importance of managerial cognitions for the corporate wide transformation process. According to them it is crucial that managers recognize new conditions and should be able to identify the link between environmental changes and corporate strategy. GREVE (1998) analysed from a cognitive point of view how managers change the market position of their company. Due to the large risk in such cases managers tend to observe innovate companies and to imitate their behaviour. This is in line with a research result from HUFF and REGER (1993), which analysed perception of strategic similarities in the banking industry. Corresponding to their cognitive frames, banks observe and cluster their competitors as well as modify their competition approach in order to respond to these clusters.

A particular relevance of cognitive research exists in terms of amphiboly management. In this situation it is insecure how the corporate future might be or that different perceptions of reality exist, but it is not possible to identify the right one. I would like to highlight that managers in most companies face such situations. STONE and BRUSH (1996) argue that in ambiguous situations strategic planning is not used for the best allocation of resources; instead it can be interpreted as a strategy to acquire resources. To acquire resources different groupings try to formalize their approaches and to receive an authorization by decision-makers. At the same time these groupings have to be informal and unspecific in order to receive support by other lobbies. Hence the strategic planning becomes a battle field for legitimisation and support. SIMONIN (1999) sees that amphibolies have an impact on willingness and realization of knowledge transfer. Therefore amphibolies have an impact on the behaviour in alliances, too.

So what are the lessons learned? A change of managerial education represents only one part. This is an important aspect not only for regulators and public; it needs to be considered from the organization itself if it wants to avoid certain situations, i.e. loss of reputation or public distrust. Furthermore the general conditions within the organization (i.e. governance aspects, general ethics how to make business) and its surrounding framework have a strong impact. Hence I recommend that organizations express clearly their expectations and understandings concerning “good management and sound business” to all levels of managers and employees.

LIKE WHAT YOU'VE READ? If so, subscribe to our mailing list. Just enter your best mail address and press the Subscribe button!

Leave a Reply

Required fields are marked *.