Organizational performance and strategic inertia

Abstract

Abstract

Purpose – The purpose of this paper is to analyze the relationship between organizational performance
and the pattern of strategic decisions formalized in the planning of a Brazilian heavy construction
company between 2006 and 2014. In this period, the company experienced a recurrent pattern of
maintaining strategic decisions, despite the systematic decrease in performance and investments in the
formal strategic planning (SP) and monitoring of results. The research focus is on strategic inertia and
the influence of social determinants on the relationship between performance and the strategic actions
negotiated in formal planning.

Design/methodology/approach – This is a single-case study. The exploratory-descriptive research
comprises data collection on performance and strategic decisions from the period between 2006 and
2014. The analysis was guided through documentary material and data collected from 16 interviews
conducted with members of the middle to top management concerning performance, goals, and strategic
initiatives. The interviewees’ statements were used to apprehend the interpreted dimension of SP
expressed in the meanings attributed to this process. The analysis adopts a sociological base, and
strategic inertia is the underlying phenomenon that guides this analysis.

Findings – The results show the interactive effect caused by political, cognitive, discursive, and ceremonial
mechanisms obstruct the company’s strategic decisions. This case study illustrates that the conditions for the
phenomenon of path dependence were created, reinforcing the strategic inertia observed in the maintenance
of a reproduced pattern of strategic initiatives and goals, even though the performance was recurrently
unsatisfactory. In this case, strategic inertia showed a complex relationship between the interpreted
performance and strategic actions negotiated in formal planning, conditioned by mechanisms of trajectory
reinforcement that interfered with the conditions for strategic change.

Research limitations/implications – Strategic inertia demonstrates a complex relationship between
the interpreted performance and strategic actions negotiated in formal planning, conditioned by
mechanisms of trajectory reinforcement that interfere with the conditions for strategic change.
Future research on social mechanisms from the perspective of strategy-as-practice could be developed to
capture the tacit components, language, power games, and other relevant categories in the social interaction
of strategy development at the organizational level. In addition, future research could focus on
investigating the extent to which path dependence is contingent, assuming that it is a temporary and,
therefore, reversible process.

Practical implications – This work contributes to the view of SP from the social perspective and shows
that the relationship between performance and strategy has biases that can compromise performance.
The work highlights implications for maintaining strategic initiative patterns, which shape a path whose
function is less associated with its effects on performance and more associated with the commitment to
instrumental results, due to the social nature of organizations.

Social implications – This work deals with social mechanisms that influence strategic decisions.
Since organizational performance depends on strategic decisions, the social nature of strategic inertia has
causal implications to economic and social impact of organizations.

Originality/value – This work argues in favor of the influence of self-reinforcing mechanisms of path
dependence in the relationship between performance and strategic decisions. The results extended
the predominantly structural approach of path dependence by considering interpretive aspects related to the
political, discursive, cognitive, and ceremonial dimensions of strategic inertia.

Keywords Organizational performance, Organizational strategy, Strategic inertia, Path dependence