An Empirical Analysis of Strategic Issue Management Performance
Markus Kajanto, Director, Corporate Strategy
Nokia Corporation, P.O. Box 226, FIN-00045 NOKIA GROUP, Finland
Telephone: +358 40 552 9710, Telefax: +358 7180 38866, Email: markus.kajanto@nokia.com
Matti Keijola, Researcher
Helsinki University of Technology, P.O. Box 5500, FIN-02015 TKK, Finland
Telephone: +358 40 508 9739, Telefax: +358 9 451 3066, Email: Matti.Keijola@hut.fi
Peter Kunnas, Manager, Strategy Development
Nokia Corporation, P.O. Box 226, FIN-00045 NOKIA GROUP, Finland
Telephone: +358 50 4802658, Telefax: +358 7180 38866, Email: peter.kunnas@nokia.com
Tomi Laamanen, Professor
Helsinki University of Technology, P.O. Box 5500, FIN-02015 TKK, Finland
Telephone: +358 400 609 544, Telefax: +358 9 451 3095, Email: Tomi.Laamanen@hut.fi
Markku Maula, Professor
Helsinki University of Technology, P.O. Box 5500, FIN-02015 TKK, Finland
Telephone: +358 40 556 0677, Telefax: +358 9 451 3095, Email: Markku.Maula@hut.fi
PAPER PROPOSAL TO THE COPENHAGEN STRATEGY CONFERENCE 2006
August 15, 2006
ABSTRACT
Firms have different ways to deal with issues emerging from outside their regular,
calendar-driven strategy processes. These practices of managing strategic issues tend to
be non-structured and highly dependent on the different issue characteristics. This paper
examines the effects of two central issue characteristics – perceived value at stake and
perceived uncertainty – on the actions in managing strategic issues and the performance
outcomes of these practices. Our paper provides one of the first empirical analyses on the
determinants of strategic issue management system performance.
KEYWORDS
Corporate strategy process, strategic issue management, decision quality
An Empirical Analysis of Strategic Issue Management Performance
INTRODUCTION
It has now been nearly 20 years since Dutton and Duncan (1987a) and Dutton and
Ottensmeyer (1987d) called for more empirical research on strategic issue management
systems. Since then over 200 articles have appeared citing their work, but there are still
only a handful of empirical analyses on how companies in practice deal with strategic
issues, which can be defined as “developments or trends that emerge from an
organization’s internal or external environments” (Dutton et al., 1987d). Yet,
understanding the dynamics of how respond to strategic issues is today more relevant
than ever due to the increasingly fast-paced changes in the globalized world.
One of the primary challenges of empirical research on strategic issue management
systems has been the difficulty of researchers to gain access to company internal data that
would enable an in-depth analysis of the dynamics of a strategic issue management
system. Our study has been able to overcome the challenge of data availability and builds
on a detailed empirical analysis of the issue management processes of a successful global
information technology firm. The time period of our analysis is three years and our data
covers the processing of all the 92 strategic issues that emerged and were dealt with
during that time-frame by the corporate strategy board of the firm.
Our paper extends the earlier research on strategic issue management and
organizations as interpretation systems (Daft et al., 1984) in several ways. First and
foremost, it contributes to research on strategic issue management by opening up the
black box of a company’s corporate level strategic issue management system. While
earlier research has emphasized the effect of categorizing an issue into an opportunity or
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An Empirical Analysis of Strategic Issue Management Performance
a threat (Dutton et al., 1987c; Jackson et al., 1988), our empirical analysis shows that also
the perceived value at stake and perceived uncertainty play highly significant roles in
determining the quality and impact of decisions regarding strategic issues. However,
contrary to what one would have expected based on previous literature, many of the
different issue characteristics would seem to have quite little explanatory power with
regard to the issue management process practices. While the perceived value at stake
would seem to be related to the amount of resources invested for managing the strategic
issue, the perceived uncertainty does not seem to be much related to the different
practices for managing the strategic issues.
When examining the performance implications of the different organizational
characteristics of the strategic issue management process, we find that the total resource
investment made into managing a strategic issue contributes positively to the issue
impact, but not to decision quality. Uncertainty is the strongest negative determinant of
decision quality. Also the proportion of visitors, that is people not regularly involved in
the process, would seem to be negatively related to decision quality. To our surprise,
however, the power of the task force team members and their centrality are not related to
decision quality and impact. This may be due to the democratic networking style of issue
management in the case company that causes the decision quality and impact not to be
extensively driven by organizational power or centrality.
The paper is structured as follows. Section 2 reviews prior literature and develops
our hypotheses. Section 3 discusses our empirical setting, measures, and methods.
Chapter 4 reports the results from our empirical analysis. Section 5 discusses the findings
and their implications, provides directions for future research, and concludes the paper.
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An Empirical Analysis of Strategic Issue Management Performance
THEORY AND HYPOTHESES
There is an extensive body of research on strategy processes (for reviews, see e.g.
Chakravarthy et al., 2003; Chakravarthy et al., 1992; Pettigrew, 1992), strategic issue
management (Ansoff, 1984; Dutton et al., 1987a, 1987b), and organizational practices for
responding to environmental opportunities (Aguilar, 1967; Barr et al., 1992; Daft et al.,
1988; Garg et al., 2003; Hambrick, 1982; Ocasio, 1997). In the following, we will review
these bodies of literature in order to build a basis for our hypotheses and an empirical
analysis of the organizational dynamics of strategic issue processing.
Ansoff (1984) originally defined strategic issue as a forthcoming development,
either inside or outside of the organization, which is likely to have an important impact
on the ability of the enterprise to meet its objectives. A collection of these issues is the
key strategic issues list. For Ansoff a strategic issue was something that needed
management attention outside the calendar driven planning cycle, sometimes as a result
of surprising events (Ansoff, 1975). Dutton and Duncan (1987b) extended the idea by
discussing a strategic issue array, a set of strategic issues that emerge as a result of
strategic planning and as input to initiation and implementation of strategic change.
Ansoff (1984) also put forward the concept of strategic issue management system
(SIMS) which he defined as a system with which a firm processes its strategic issues. He
defined its content and relationship to strategic planning, responsibilities of the players
involved as well as tools to be used. Regarding its implementation he stated that “the
acceptance of SIM by top management is the major problem to solve”.
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An Empirical Analysis of Strategic Issue Management Performance
Since Ansoff strategic issues and issue management systems have been extensively
studied by Dutton et al. (Dutton, 1986, 1993; Dutton et al., 1997; Dutton et al., 1987a;
Dutton et al., 1983; Dutton et al., 1987c; Dutton et al., 1987d). These studies have
discussed strategic issue diagnosis (Dutton et al., 1983); strategic issues categorization
(Dutton et al., 1987c); influence of the strategic planning process on strategic change
(Dutton et al., 1987b); forms, functions, and contexts of strategic management systems
(Dutton et al., 1987d); the role of uncertainty and feasibility on the patterns of interest
around issues (Dutton et al., 1988); discerning threats and opportunities (Jackson et al.,
1988); and selling issues to top management (Dutton et al., 1993). Whilst Ansoff’s
research was prescriptive, Dutton’s research with her colleagues has contributed to the
development of an improved conceptual understanding of the cognitive categorization
processes and dependencies between sensemaking and action.
Extending Ansoff’s and Dutton’s research, Ocasio discusses organizations as
systems of structurally distributed attention (Ocasio, 1997). According to Ocasio,
cognition and action of individuals are not predictable from the knowledge of individual
characteristics, but are derived from the specific organizational context and situations that
individual decision makers are in. He defines attention to encompass the noticing,
encoding, interpreting, and focusing of time and effort by organizational decision-makers
on both (a) issues; the available repertoire of categories for making sense of the
environment: problems, opportunities, and threats; and (b) answers: the available
repertoire of action alternatives: proposals, routines, projects, programs, and procedures.
The central relationship in Ocasio’s systems view of organizations is the
relationship between individual and organizational information processing. This contrasts
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An Empirical Analysis of Strategic Issue Management Performance
with the earlier perspectives of organizational cognition that has emphasized the shared
cognitions of organizational members or its top management team (e.g. Walsh, 1995).
Ocasio proposes three interrelated metatheoretical premises for information
processing that underlie how a firm distributes and regulates the attention of its decisionmakers. At the level of individual cognition, the principle of focus of attention links
attentional processing to individual cognition. At the level of social cognition, the
principle of situated attention highlights the importance of the situational context for
decision makers’ action. At the organizational level, the principle of structural
distribution of attention relates to how the firm’s economic and social structures regulate
and channel issues, answers, and decision makers into the activities, communications, and
procedures that constitute the situation context of decision making.
At the individual level, attentional processes focus energy, effort, and mindfulness
of organizational decision makers on a limited set of elements that enter in to
consciousness at any given time. Focused attention facilitates perception and action
towards the issues and activities being attended to. At the individual level, two models of
attentional processing can be distinguished: controlled and automated processing. In the
case of automatic processing, actions are routinized and habitual. In the case of controlled
processing, the action of decision-makers is triggered by those issues and answers they
are mindful of. However, given their selective attention, decision makers are limited in
the number of issues and answers they can attend to in any situation (Ocasio, 1997).
The focus of attention is triggered by the characteristics of the situations the
decision makers confront. Thus, individuals vary their attention depending on the
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An Empirical Analysis of Strategic Issue Management Performance
situational context. The situational context provides a link between how individuals think
and decide in a particular context and how the organization and its environment shape the
situations that individuals find themselves in. Also, the dynamics of attention focusing
and issue strengthening are related to how an organization distributes and controls the
allocation of issues, answers, and decision makers within firm’s activities,
communications, and procedures. According to Ocasio, attentional processes of
individual and group decision makers are distributed throughout the multiple functions
that exist in organizations, with different foci of attention in each local procedure,
communication, or activity. Simon (1947) uses a similar conception of organizations
when he describes organizational behavior as a complex network of attentional processes.
Our hypotheses focus on individual and organization level processes in strategic
issue management systems. Specifically we examine managements’ perceptions of two
key strategic issue characteristics – perceived issue importance driven by value at stake
and perceived uncertainty - and their effects on issue management processes and issue
management performance outcomes.
Issue importance
The perceived importance of an issue can be regarded as one of the most critical
characteristics of strategic issues from the managerial point of view. While all issues that
are regarded by management as strategic issues are likely to be given high priority, there
is still quite a variation across issues that are seen to require strongest possible teams with
abundant resources and issues that can be handled more routinely.
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An Empirical Analysis of Strategic Issue Management Performance
The perceived value at stake is an important issue characteristic since it can be
expected to lead to higher organizational commitment and momentum on all the levels of
the organization. Issues that are perceived to have high loss or value-added potential for
the firm are likely to receive more top management attention. Top management attention
is also likely to lead to higher organizational attention in general and larger responses
when dealing with the issue. Important issues are also more likely to be coordinated by
some of the most central key people in the strategic planning organization and they are
likely to receive higher total investment in assessing and managing the issue.
Hypothesis 1. The higher the perceived value at stake of a strategic issue the more likely
it is (a) to receive higher total resource investment in managing the strategic issue, (b) to
be resourced with a team possessing higher organizational power, (c) to leverage the
knowledge of visiting experts, and (d) to be coordinated by the most central people in the
issue management organization.
In addition to the above hypothesized effects on four issue management choices, we
also expect direct effects on decision impact. The higher the value at stake, the higher we
expect the organizational impact of the decision to be.
Hypothesis 1e. The perceived value at stake is positively related to decision impact when
controlling for the effects of resources invested in issue management.
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An Empirical Analysis of Strategic Issue Management Performance
Issue uncertainty
When a strategic issue enters management’s consciousness, it typically involves at
least two types of uncertainties. Firstly, it is commonly not clear whether the issue
requires any action from the firm. It may be that the firm is better off by not responding
to the strategic issue at all. Secondly, while it might be clear that the firm has to
acknowledge the issue, it may be uncertain what the optimal reaction should be. A
response to an emerging new technology might be to start a competitive race in
developing the new technology or to focus on developing a substitute.
Dutton and Duncan (1987a) discuss the role of management’s understanding of a
strategic issue and its relationship to the firm’s perceived capability to respond to it.
Accordingly, the management may feel (a) powerless when it does not understand the
issue and feels that that it does not have the capability to respond, (b) trapped when it
understands the issue, but feels that it does not have the capability to respond, (c)
perplexed when understanding is lacking, but capability is high, and (d) propelled, when
both capability and understanding are high. Each of these types of perceptions is likely to
affect management’s actions differently when dealing with the strategic issue.
The perceived uncertainty of an issue not only conditions the actions of the firm
dealing with it. It also determines which issues attract management’s interest in the firms
place. Dutton and Webster (1988) examined the roles of uncertainty and feasibility as the
determinants of management’s interest in strategic issues. Based on an innovative
behavioral simulation, they found that uncertainty tended to reduce management’s
interest in issues. This finding supports the line of reasoning that issues that are in less
uncertain contexts constitute for executives a less risky personal strategy with lower
9
An Empirical Analysis of Strategic Issue Management Performance
changes of failing. An alternative explanation would have been that high levels of
uncertainty motivate executives for more collective action in order to pool resources and
expertise for optimally dealing the strategic issue.
Even if the personal risk minimization strategy would dominate issue emergence,
one would expect the pooling of resources and expertise arguments to have a more
important role when an issue has been identified and it is determined whether and what
kind of action is required. When an issue is being formally brought to the management
team or a corresponding organization, collective evaluation of the required actions leaves
less room for personal uncertainty preferences. While we do not expect uncertainty to
increase the total investment for issue processing, we do expect that the higher the
uncertainty, the larger the number of visitors involved in pooling expertise. Moreover, we
also expect that uncertain issues are likely to receive less resource investment due to the
uncertain nature of their future payoffs (March, 1991).
Hypothesis 2. The higher the perceived uncertainty of a strategic issue the more likely it
is (a) to receive lower total resource investment in managing the strategic issue , (b) to be
resourced with a team possessing lower organizational power, (3) to leverage the
knowledge of visiting experts, and (d) to be coordinated by the most central people in the
strategic planning organization.
In addition to the above hypothesized effects on four issue management choices, we
also expect direct effects on decision quality. The higher the perceived uncertainty, the
lower the we expect the decision quality to be.
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An Empirical Analysis of Strategic Issue Management Performance
Hypothesis 2e. The perceived uncertainty is negatively related to decision quality when
controlling for the effects of resources invested in issue management.
Issue management
In addition to predicting the impact of issue characteristics on issue management
and performance, we also predict that these issue management approached influence the
performance. For example, Oh, Chung, and Labianca (2004) argue that group
effectiveness is dependent on the group members’ social ties within a group and the
group members’ ties to the broader organization. When hypothesizing the effects of issue
management characteristics, we focus our attention to four issue management attributes:
total resources invested in resolving the strategic issue, combined task force
organizational power, proportion of visiting experts in the issue management team, and
the centrality of the team members in network of individuals in the issue management
system. The first two resourcing decisions - total resources and organizational power of
the members - primarily deal with resource commitments whereas the two latter decisions
influence the access to diverse information and issue management expertise through
involvement of visiting experts and experienced issue management experts.
In terms of resource commitment and organizational power related decisions, we
expect that greater the resourcing of the issue processing team and the higher the
combined organizational power of the issue processing team, the higher the decision
quality and impact. In terms of information processing related decisions, we expect that
the greater the share of visiting experts in the strategic issue management team, the higher
the reach and the better the decision quality and impact. Visiting experts can bring
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An Empirical Analysis of Strategic Issue Management Performance
additional expertise and broaden the search for solutions. Furthermore, the more central
the members of the issue processing task-force in the issue processing network, the
higher the decision quality and impact. Central members in the issue-processing network
have a broader view to the strategic issues, as well a better access to people within the
organization who are used to solve strategic issues.
Hypothesis 3. The higher the (a) total resources, (c) combined task force power, (e)
proportion of visitors, and (g) network centrality, the greater the decision impact.
Furthermore, the higher the (b) total resources, (d) combined task force power, (f)
proportion of visitors, and (h) network centrality, the better the decision quality.
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An Empirical Analysis of Strategic Issue Management Performance
RESEARCH SETTING, MEASURES, AND METHODS
In order to test our hypotheses and to eliminate the potentially distracting influence
of differing structures and issue processing practices of different firms (Thomas et al.,
1990), we decided to restrict our research setting to one large firm. In order to further
ensure a sufficiently large number of strategic issues to focus on, we decided to choose a
large firm in a dynamically changing business environment. Using these criteria, a natural
choice for our analysis was a large globally operating information and communication
technology firm with over 50.000 employees all around the world. As the time frame of
our analysis, we chose three years from the beginning of 2001 to the end of 2003. During
this time period, the information and communications sector grew fast in terms of
communications technology diffusion, but at the same time there were significant
business logic changes, new competitors emerging, and a downward trend caused by the
bursting of the internet bubble for the whole information and communications sector.
We performed an analysis of all the corporate level strategic issues that had
emerged from outside the regular calendar driven strategy process during 2001-2003.
There were altogether 92 issues that had been discussed by the corporate strategy board
based on the preparations by the corporate strategic planning staff. For each issue we
went back to the emergence of the issue, management’s perceptions of issue importance,
uncertainty, issue management, and numerous other issue characteristics. We tracked in
detail the processing and the eventual consequences of each issue.
Our analyses started in 2003 and our research team consisting of five persons has
during the past three years spent hundreds of hours in different tasks tracking and
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An Empirical Analysis of Strategic Issue Management Performance
analyzing the issues and in searching for ways to quantify their different characteristics.
Although there are case descriptions of firms strategic issue management systems (e.g.
Oomens et al., 1999), to our knowledge, there are no studies that would have gone to a
similar depth into a global firm’s strategic issue processing practices.
As external researchers we would never had gained such in-depth access to the
central nervous system of a large firm, but since two of our research team members are
working in the case company’s corporate planning unit, we had unrestricted access to all
the internal materials and discussions concerning all the issues that had been processed
during the time period of our analysis. On the other hand, since these persons have also
been important actors in the issue management process, we had to take a number of
precautions to ensure that the measures that we developed were non-biased.
One of the ways to eliminate subjectivity was that the two internal people involved
in the analysis process cross-checked each other’s judgments. The second stage
verification took place when the issues were discussed together with the internal and
external members and where the judgments were discussed and compared to the
descriptions of the strategic issue histories. In addition to these subjectivity checks, we
also developed several alternative measures for the different issue characteristics and
emphasized measures that could also be quantified ex-post. For example, to ensure
external validity of our perceptual measures, we carried out text analysis of the original
meeting notes and found that the total investment made into a strategic issue correlated
strongly with the amount of words used in issue reporting.
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An Empirical Analysis of Strategic Issue Management Performance
Measures
Dependent variables: Decision quality and impact. As our first dependent variable,
we used the strategy board’s decision quality coded on a 5-level scale as follows [2 right,
1 somewhat right, 0 neutral, -1 somewhat wrong, -2 wrong]. The coding was based on expost knowledge of what happened afterwards by the research team. Determining the
performance of strategic issue processing is difficult, because although one can clearly
distinguish successful and failed decisions, alternative histories do not exist. Thus, it is
difficult to say whether other decisions would have been even more successful or whether
other decisions would have led even worse outcomes. Moreover, there were also many
decisions that were relatively neutral and thus could not be classified as clearly successful
or clearly non-successful decisions. From a practical point of view it is particularly
important to be able to distinguish between small and large successes and failures. Thus,
in order to complement our measure of decision quality, we also specified another binary
measure named as the decision impact which were coded with a binary scale [0,1], where
0 corresponded to insignificant effects and 1 to wide impact of the decision and
implications to subsequent work.
Independent variables: Value at stake. The perceived value at stake of a strategic
issue was determined using a scale of [1,2,3] where 1 corresponds to a value impact less
than 0.5% of the firm’s market capitalization, 2 to a value impact between 0.5% to 5% of
market capitalization, and 3 to above 5% of market capitalization. The market
capitalization of the studied firm ranged during the time period of study between 50 and
200 Billion dollar.
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An Empirical Analysis of Strategic Issue Management Performance
Uncertainty. The perceived uncertainty was defined on a three-levels scale of
[1,2,3]. Accordingly, 1 corresponded to simple lack of information that could be reduced
through additional information collection, 2 corresponded to lack of knowledge where
such information could be gained, and 3 corresponded to a more fundamental inability to
know what is going to happen.
Organizational power, total amount of resources invested, the proportion of
visitors, and the centrality of issue task force members. To create a measure of the
organizational seniority of the issue management team, we determined the organizational
power of the issue processing task force as the sum of squares of the inverse number of
the member’s distance in organizational layers from the top of the organization.
Organizational investment in issue processing was determined on a scale of [1,2,3] where
1 corresponded to “One man’s show”, 2 corresponded to 1-10 people actively involved in
issue processing, and 3 corresponded more than 10 people actively involved.
In addition we also determined the proportion of external visiting team members
from outside the strategic planning organization. Finally, we also mapped the network
constituted by the members of the strategic planning organization and determined the
network centrality of the strategic issue task force members. The network was created so
that a link was established between all the people that had been involved in processing
the same strategic issue over the three-year time horizon. Thus, the higher the total
centrality of the strategic issue task force members in strategic issue processing, the more
core personnel they were and thus also they were the most experienced in managing
strategic issues.
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An Empirical Analysis of Strategic Issue Management Performance
Method
As the main statistical method in our analysis we use structural equation modeling
that has gradually become a broadly applied method in strategy research (e.g. Shook et
al., 2004). Structural equation modeling is particularly well suited to circumstances
where there are issue-specific variables, such as perceived urgency, uncertainty, and
feasibility that are expected to cause certain organizational issue staffing decisions and
thus are both directly and indirectly are related to the successful processing of the
strategic issues. The final set consisting of 92 issues with complete data provides a
sufficient quantitative basis for applying these methods. For calculating the network level
measures, such as the centrality of strategic issue processing team members, we used the
Ucinet VI network analysis software.
RESULTS
Table 1 provides the descriptive statistics and correlations of our data. The
correlations are below the 0.7 threshold indicating that there should not be serious
multicollinearity problems inherent in our research setting. The highest correlation is
between the task force power and the network centrality of task force members. This is as
expected since the most powerful persons also tend to be central in an issue management
network. As also expected, the decision impact is positively correlated with decision
quality and, on the other hand, uncertainty is negatively correlated decision quality.
[PLACE TABLE 1 HERE]
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An Empirical Analysis of Strategic Issue Management Performance
In order to test the hypotheses and to gain a deeper understanding of how the two
strategic issue characteristics affect the strategic issue management process and how the
process characteristics themselves affect the eventual issue management process
outcome, we estimated a path model where we modeled the process characteristics as
intermediating variables between the three issue characteristics and the strategic issue
management outcome. The resulting model goodness-of-fit indices indicate a moderate fit
(NFI 0.445, IFI 0.480, CFI 0.395, RMSEA 0.271). The results of our analysis and the test
for our first hypotheses are shown in Figure 1 and Table 2.
[PLACE FIGURE 1 HERE]
[PLACE TABLE 2 HERE]
In line with our hypothesis 1a, the perceived value at stake of an issue is positively
related to the amount of resources invested in managing the issue. These resources are
then further positively related to decision impact.
However, failing to support our Hypothesis 1b, the value at stake does seem to be
only very weakly related to the allocation of powerful members to the task force or the
centrality of task force. Also the relationship between value at stake and the proportion of
visiting experts (Hypothesis 1c) was insignificant. Furthermore, failing to support
Hypothesis 1d, the value at stake would even seem be negatively related to the centrality
of the issue processing staff even though the centrality of the staff would itself appear to
be positively related to decision quality. The direct effect of value at stake on decision
impact was positive and significant providing support for Hypothesis 1e.
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An Empirical Analysis of Strategic Issue Management Performance
Contrary to our hypotheses 2a-2d, the perceived uncertainty does not seem to be
related to any of our strategic issue management process characteristics. It is, however,
strongly negatively related to the decision quality, as predicted in Hypothesis 2e. In
particular one would have expected the proportion of visitors involved into the strategic
issue management process would have helped decrease the effect of uncertainty on
decision quality. However, to the contrary, it seems that also the proportion of visitors is
negatively related to decision quality.
In Hypotheses 3a-3h we predicted effects between issue management
characteristics and issue outcomes. We found two significant relationships. Supporting
Hypothesis 3a, we found that total resource investment is positively related to decision
impact. Secondly, contrary to Hypothesis 3f, we found that the proportion of visiting
experts had in fact negative relationship with decision quality. The other relationships
between the issue management characteristics and issue outcomes were insignificant
failing to provide support for the hypotheses.
Since our results are based on the issue management process characteristics of only
one large firm, it is difficult to draw normative implications of whether these results
reflect how an issue management process should optimally be run or whether there would
in fact be potential for more consciously configuring the issue management process
characteristics in order to alleviate some of the potentially negative effects of uncertainty
on decision quality.
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An Empirical Analysis of Strategic Issue Management Performance
DISCUSSION
This paper provides the results of an analysis of a unique dataset on strategic issue
processing in a large global corporation. It provides one of the first ever empirical studies
on strategic issue management systems and their characteristics. Even though Dutton and
Duncan (1987a) called for empirical research on strategic issue management processes
already nearly 20 years ago, empirical evidence has remained scarce due to the lack of
sufficiently high quality data. There have been behavioral simulations (Dutton et al.,
1988), empirical analyses on the implications of framing an issue either as a threat or
uncertainty (Bansal, 2003; Barr et al., 2004; Chattopadhyay et al., 2001; Day et al., 1992;
Dutton et al., 1987c; Jackson et al., 1988; Schneider et al., 1991; Thomas et al., 1990),
and conceptual papers that emphasize the importance of strategic issue processing, but no
empirical work on the functioning of a real-life strategic issue management system.
Contributions to research
This paper contributes to research on strategic issue management systems by
opening up the black box of a company’s corporate level strategic issue management
system. While earlier research has emphasized the effect of categorizing an issue into a
opportunity or a threat, our analysis shows that in particular the perceived value at stake
and the perceived uncertainty play significant roles in determining the quality and impact
of decisions regarding strategic issues. However, contrary to what one would have
expected based on literature, the different issue characteristics seem to have quite little
explanatory power with regard to the different issue management process characteristics.
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An Empirical Analysis of Strategic Issue Management Performance
Some of the strongest strategic issue management system relationships would seem
to be between the relationships between perceived value at stake, resources invested in
managing the issue, and issue impact. Resource investment alone is, however, a rather
blunt instrument in managing a strategic issue. Large amounts of resources invested may
ensure high impact already due to its escalation of commitment effect (Brockner et al.,
1986; Conlon, 1999; Staw et al., 1995) without yet ensuring decision quality. The
strongest determinant of the decision quality, on the other hand, would seem to be the
perceived uncertainty. Interestingly, however, uncertainty would not seem to be
compensated by the different issue management process characteristics. One practical
reason for this may be that uncertain issues are handled more lightly, almost as options
with a small investment into the issue while the issues with a high value at stake tend to
be already on a higher level of certainty and represent more of the exploitation dimension
than the exploration dimension (Levinthal et al., 1993; March, 1991).
Managerial implications
Since our study represents to our knowledge one of the first comprehensive
empirical analyses of the key parameters of a strategic issue management system within a
large company, we would expect it to be of interest for persons running their own
company’s strategic issue management systems. In particular, we find that the different
means for configuring strategic issue management task forces and processes inside a firm
do matter in the successful management of strategic issues.
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An Empirical Analysis of Strategic Issue Management Performance
Directions for future research
Although strategic issue management systems represent a nearly 30-year old
research area, there continues to be scarcity of empirical evidence of how companies deal
with their strategic issues and how to develop a well functioning strategic issue
management system. Thus we join to the earlier calls for in-depth empirical research on
the strategy practices with which companies manage issues emerging from outside their
strategy processes. This is a topic that should continue to be at the core of the strategic
management research stream.
Surprising events such as 9/11 have recently revived an interest in the concept of
strategic surprises that was quite central already in the early work of H.I. Ansoff (1975).
Strategic surprises are “events that happen unexpectedly or expected events that take an
unexpected shape.” (Pina e Cunha et al., 2005). The key defining variables of surprises
are the “(un)expectedness” of the issue and the “(un)expectedness” of the process of how
an issue emerges. While this research stream focuses on deepening our understanding of
the issue triggering stage when an organization becomes surprised, we see there major
future opportunities also in studying strategy practices following strategic surprises.
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An Empirical Analysis of Strategic Issue Management Performance
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An Empirical Analysis of Strategic Issue Management Performance
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An Empirical Analysis of Strategic Issue Management Performance
0.36***
R2=0.09
Total resources
invested
0.24**
R2=0.27
0.31***
0.09
Value at stake
-0.15
-0.10
R2=0.01
Combined task
force power
R2=0.02
0.01
-0.02
Uncertainty
0.07
0.08
-0.15
-0.10
R2=0.20
Proportion of
visitors
-0.16*
Decision
quality
0.06
-0.04
R2=0.01
Network centrality
Decision
impact
0.04
0.14
-0.35***
Figure 1.
Structural equation model showing the model specification and the maximum likelihood
estimation results. The numbers above the one-headed arrows show the standardized
regression coefficients. The number above the two headed arrow is a correlation
coefficient. Dotted lines represent non-significant relationships. Non-dotted normal lines
represent significant relationships and bolded lines strongly significant relationships.
26
An Empirical Analysis of Strategic Issue Management Performance
Table 1. Means, standard deviations, and correlations of the studied variables
Mean
S.D.
1
2
1 Decision quality
1.21
0.92
1.00
2 Decision impact
0.57
0.50 0.39*** 1.00
3 Value at stake
2.02
0.78
0.13 0.45***
4 Uncertainty
1.84
0.65 -0.37*** -0.09
5 Implementation challenge
1.59
0.50
-0.20*
0.07
6 Resources invested
2.18
0.49
0.11 0.38***
7 Combined task force power
0.28
0.17
0.01
0.19*
8 Proportion of visitors
0.67
0.42
-0.18* -0.22**
9 Network centrality
9.66
9.16
0.08
0.09
10 Year 2
0.36
0.48
0.18*
0.15
11 Year 3
0.32
0.47 -0.33*** -0.40***
* significant at 10%; ** significant at 5%; *** significant at 1%
3
4
5
6
7
8
9
10
1.00
-0.19*
1.00
-0.15 0.44*** 1.00
0.30*** -0.04
0.00
1.00
0.10
-0.04
0.03
0.13
1.00
-0.16
0.09
0.06
-0.19* -0.30*** 1.00
-0.10
-0.02
0.07
0.11 0.61*** -0.10
1.00
0.01
-0.16 -0.25** -0.05
0.03
0.05
0.24** 1.00
0.04
-0.05
0.05
-0.16
-0.13
0.15 -0.31*** -0.51***
27
An Empirical Analysis of Strategic Issue Management Performance
Table 2. Maximum likelihood structural regression estimation results with both non-standardized and
standardized coefficients and two-tailed significance tests. S.E. is the standard error of the regression
coefficient and C.R. the critical ratio.
28