An Integrative Framework for Strategy-Making Processes
Author(s): Stuart L. Hart
Source: The Academy of Management Review, Vol. 17, No. 2 (Apr., 1992), pp. 327-351
Published by: Academy of Management
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? Academy of Management Review
1992, Vol. 17, No. 2, 327-351.
AN INTEGRATIVE FRAMEWORK FOR
STRATEGY-MAKING PROCESSES
STUART L. HART
University of Michigan
Most prior literature on strategy making has focused on a limited set
of themes (e.g., rationality) or actors (e.g., top managers). Resulting
typologies have, therefore, tended to be incomplete or overlapping.
None have captured the full range of content associated with the phenomenon. In response, this article offers an integrative framework
consisting of five modes: command, symbolic, rational, transactive,
and generative. The framework is based on the varying roles top
managers and organizational members play in the strategy-making
process. It goes beyond existing strategy process models by contrasting these roles and illustrating their interaction. Strategy making is
viewed as an organizationwide phenomenon. Research propositions
are also developed linking strategy-making processes to firm performance.
Over the years, scholars have addressed strategy making from a number of different perspectives (e.g., Ansoff, 1965; Barnard, 1938; Hofer &
Schendel, 1978; Lindblom, 1959; March & Simon, 1958; Mintzberg, 1973;
Quinn, 1978). These varying approaches have spawned a bewildering array of competing or overlapping conceptual models. Indeed, during the
past three decades, authors have developed scores of different strategymaking typologies (e.g., Bourgeois & Brodwin, 1984; Chaffee, 1985; Mintzberg, 1978; Nonaka, 1988), resulting in "model proliferation." Associated
empirical work (e.g., Fredrickson & Mitchell, 1984; Miller & Friesen, 1977,
1983; Shrivastava & Grant, 1985; Wooldridge & Floyd, 1990) has covered
such a wide range of considerations that little cumulative knowledge has
resulted. A conceptualization that is capable of providing a framework for
ongoing research is lacking.
This article offers an integrative framework for strategy-making pro-
cesses composed of five modes: command, symbolic, rational, transactive,
and generative. The framework is based on the contrasting roles top managers and organizational members play in the strategy-making process. It
illustrates the roles and describes the interaction among them. The modes
Kate Banbury, Dan Denison, Jane Dutton, Avi Fiegenbaum, Susan Schneider, and Paul
Shrivastava provided valuable comments and suggestions on earlier versions of this article.
The School of Business Administration at the University of Michigan provided support for the
research.
327
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represent "pure" process types that can be blended into different combinations. Together, the five modes serve to integrate and reconcile a number of
previous models and typologies.
Research propositions suggest relationships among the strategy-
making modes and dimensions of firm performance, including the moderating effects of several key contingency factors. Because firms usually develop competence in several modes, propositions also describe the most
effective combinations of the five strategy-making modes.
PRIOR LITERATURE
Historical Evolution of the Field
Strategy has a long and venerable intellectual history. The foundation
of this literature is the well-known rational model, which calls for comprehensive and exhaustive analysis prior to decision (Fredrickson & Mitchell,
1984). Rationality implies that a decision maker (a) considers all available
alternatives, (b) identifies and evaluates all of the consequences which
would follow from the adoption of each alternative, and (c) selects the alternative that would be preferable in terms of the most valued ends (Mey-
erson & Banfield, 1955). The rational model of decision making applied to
strategy suggests systematic environmental analysis, assessment of internal
strengths and weaknesses, explicit goal setting, evaluation of alternative
courses of action, and the development of a comprehensive plan to achieve
the goals (e.g., Andrews, 1971; Ansoff, 1965; Hofer & Schendel, 1978; Porter,
1980). Organizationally, this calls for the use of a formal strategic planning
system (Lorange & Vancil, 1977; Wood & LaForge, 1979).
An equally persuasive body of behavioral theory has challenged the
assumptions of rationality (Cyert & March, 1963); according to this theory, at
best, individuals and organizations can achieve only bounded rationality
(Simon, 1957). At the individual level, cognitive limits cause decision makers
to adopt simplified models of the world, to limit search behavior to incrementally different options, and to accept the first satisfactory outcome (Lind-
blom, 1959; March & Simon, 1958; Simon, 1952). Individuals rely on schema
or cognitive maps to organize issues and events into manageable sets of
categories (Dutton & Jackson, 1987; Schwenk, 1988). In addition, heuristics
and biases in human judgment result in many departures from optimality
(Schwenk, 1984; Tversky & Kahneman, 1974).
At the organizational level, strategic assumptions form the basis for
organizational frames of reference (Mason & Mitroff, 1981; Schneider &
Shrivastava, 1987; Shrivastava & Schneider, 1984), which predispose firms
to act in particular ways. Finally, the difficulty of organizational goal setting
can lead to politically motivated behavior among actors that results in a
disjointed, incremental organizational process often described as muddling
through (Braybrooke & Lindblom, 1963; Cyert & March, 1963; MacMillan &
Jones, 1986; Simon, 1964). Independent assumptions about organizational
intention can result in a garbage can model of strategic choice, and strategy
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emerges as a result of organized anarchy (Cohen, March, & Olsen, 1972).
The behavioral literature thus suggests a more limited and less encompassing role for top managers in the strategy-making process. It challenges both
the cognitive and motivational assumptions inherent in the rational model
and suggests that organizational members play a significant role in the
process (Mintzberg, 1978).
Recognizing these limitations, Quinn (1978) proposed logical incrementalism as the normative ideal for strategy making. In this model executives
may be able to predict the broad direction, but not the precise nature, of the
ultimate strategy that will result. Accordingly, top managers focus on identifying a broadly defined direction for the organization, allowing the details
to emerge over time. Following this line of thinking, an increasing number
of writers have advocated the importance of top management vision and
the nurturing of strong corporate values in the strategy process (Conger &
Kanungo, 1988; Kotter, 1988; Pascale, 1985; Peters, 1987; Weick, 1987). Thus,
rather than seeking to be comprehensive-the ideal of rationality-top
managers work to create a general sense of purpose and direction that will
guide the actions taken by organizational members (Bennis & Nanus, 1985;
Johnson, 1988). The vision serves to create both chaos and order: It creates
chaos by continually challenging organizational members to go beyond the
status quo yet provides order by offering a long-term direction as a beacon
that will guide individual, short-term action (Nonaka, 1988). As part of the
vision, top managers must capture the imagination of organizational members (Burns, 1978; Stata, 1988). Effective visionary leadership is a two-way
street, implying mutual obligation (Westley & Mintzberg, 1989). Without the
commitment and involvement of organizational members, there can be no
strategic vision.
Accordingly, commitment through involvement has emerged as another important ingredient in the strategy-making literature of the past de-
cade. Usually, in rational models strategy making is envisioned as the province of top managers only (e.g., Andrews, 1971; Ansoff, 1965; Porter, 1980).
However, scholars also have noted the increasing trend toward wider involvement of organizational members in strategic concerns (Guth & Mac-
Millan, 1986; Hickson, Butler, Cray, Mallory, & Wilson, 1986; Imai, 1986;
Mintzberg, 1990; Rhyne, 1986; Wooldridge & Floyd, 1990). Difficulties with
strategy implementation (Galbraith & Kazanjian, 1986) and an increasing
rate of environmental change (Ansoff, 1979) are often cited as the reasons for
such involvement. Others have noted the growing importance of intrapreneurship (by organizational members) to innovation and corporate success
(Burgelman, 1984; Kuratko, Montagnor, & Hornsby, 1990; Quinn, 1985).
Burgelman (1983) captured this theme well by identifying induced and
autonomous strategic behavior on the part of organizational members. Induced behavior implies rationality-the deliberate use (by top management) of structure and formal control systems to motivate employees to behave in desired ways, presumably to implement a formulated strategy.
Autonomous behavior, however, calls for encouragement (or at least ac-
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330 Academy of Management Review April
ceptance) of individual initiative at the operating level, in the interest of
productivity improvement and innovation (Imai, 1986). In this case, organizational members exercise autonomy by suggesting improvements, conceiving new business opportunities, and engaging in product-championing
efforts. Middle managers try to convince top management to support these
initiatives, which often represent a departure from the current strategy
(Bower, 1970).
Three recurring themes emerge. First is rationality-the extent to which
the strategic process can (or should) be comprehensive, exhaustive, and
analytical in approach. The literature makes it clear that behavioral issues
(e.g., bounded rationality, satisficing, political behavior) will limit the
achievable level of rationality. Rationality leads to the second theme in the
literature: the symbolic role of top managers in the strategy process. This
literature focuses on the extent to which leaders can articulate a clear strategic vision and motivate organizational members to adopt it. However,
implementation problems suggest the extent and type of involvement of
organizational members in the strategy-making process as a critical (and
the third) theme. These three themes organize existing strategy-making process typologies.
Strategy-Making Process Typologies
Table 1 summarizes eleven key process typologies drawn from the literature. They are categorized into the three broad themes: rationality (comprehensive and bounded), vision, and involvement.
Rationality. Several authors have developed strategy-making process
typologies based on rationality. In his classic analysis of decision making,
Allison (1971) articulated three opposing models for explaining the Cuban
missile crisis: rational actor, organizational process, and bureaucratic politics. The first model represented the classical comprehensive approach.
The latter two models suggested variations on the behavioral or bounded
rationality theme. Allison explained how outcomes can diverge from the
rational optimum due to the incremental nature of organizational routines
as well as the conflicting interests and objectives of individual actors. Nutt
(1981, 1984) elaborated on this framework, specifying six decision-making
strategies ranging from highly rational (normative decision theory) to
heavily behavioral (behavioral decision theory, group decision making).
Mintzberg (1973, 1978) presented the entrepreneurial, planning, and
adaptive modes of strategy-making. In the entrepreneurial mode, a strong
leader takes bold, risky actions on behalf of the organization. The planning
mode is characterized by formal analysis used to structure explicit, integrated strategies for the future. In the adaptive mode, the organization
responds to a difficult environment in small, disjointed steps. Organizational members play a much more important role in the adaptive mode, and
top management dominates the entrepreneurial and planning modes. The
first two modes thus display high levels of comprehensiveness. The third
mode is characterized by incrementalism. Mintzberg, therefore, provided
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TABLE 1
Categorizing the Strategy-Making Process Typologies
Themes from the Literature
Rationality
Citation Comprehensive Bounded Vision Involvement
Allison (1971) Rational Organizational;
Bureaucratic
Nutt (1981, 1984) Normative; Behavioral;
Bureaucratic Group;
Adaptive
Mintzberg (1973, Entrepreneurial; Adaptive
1978) Planning
Chaffee (1985) Linear Adaptive Interpretive
Mintzberg Plan; Ploy; Pattern Perspective
(1987a) Position
Bourgeois & Commander; Collaborative Cultural Crescive
Brodwin Change
(1984)
Nonaka
(1988)
Deductive
Inductive;
Compressive
Ansoff (1987) Systematic Ad Hoc; Organic
Reactive
Grandori (1984) Optimizing Satisficing; Cybernetic Random
Incremental
Shrivastava & Managerial Adaptive Political
Grant (1985) autocracy; planning expediency
Systematic
bureaucracy
Mintzberg & Entrepreneurial; Process; Ideological; Unconnected;
Waters (1985) Planned Consensus Umbrella Imposed
two contrasting modes of comprehensive rationality-one dominated by a
strong leader (entrepreneurial) and another dominated by formal analysis
and procedure (planning).
These different dimensions of rationality are evident in the remaining
eight typologies as well. The commander (Bourgeois & Brodwin, 1984) and
managerial autocracy (Shrivastava & Grant, 1985) modes both reflect a
strategy process dominated by a strong leader or chief executive (similar to
Mintzberg's entrepreneurial mode). In contrast, the linear (Chaffee, 1985),
deductive (Nonaka, 1988), systematic (Ansoff, 1987), optimizing (Grandori,
1984), and planned (Mintzberg & Waters, 1985) modes reflect a process
oriented toward comprehensiveness and exhaustive analysis (similar to Allison's rational mode, 1971, or Nutt's normative mode, 1984). The remaining
modes reflect the behavioral school with its bounded rationality. For exam-
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pie, Chaffee's (1985) adaptive, Mintzberg's (1987a) pattern, Ansoff's (1987) ad
hoc, Grandori's (1984) satisficing, Shrivastava and Grant's (1985) adaptive
planning, and Mintzberg and Waters' (1985) process modes all reflect strategy making that is limited by cognitive and political realities (similar to
Allison's organizational mode, 1971, and Nutt's behavioral mode, 1984).
Vision. Similar to Allison, Chaffee (1985) also described three models of
strategy making: linear, adaptive, and interpretive. The first two models are
rooted in the rationality dimension. The third model, however, taps into the
vision theme. Strategy making according to the interpretive model is con-
cerned with metaphors and frames of reference that allow the organization
and its environment to be understood by organizational stakeholders. In this
way, stakeholders are motivated to believe and to act in ways that are
expected to produce favorable results for the organization.
Mintzberg (1987a) extended the thinking on this theme with his five Ps of
strategy: play, ploy, position, pattern, and perspective. Although the first
four of these modes reflect different levels of rationality, the perspective
mode clearly reflects the symbolic approach to strategy as articulated in the
previous section. Similarly, the Mintzberg and Waters' (1985) framework
describes the ideological and umbrella modes of strategy making. Regarding the ideological mode, strategies originate in shared beliefs, and intentions exist as a collective vision for all actors. Regarding the umbrella mode,
leadership defines boundaries or targets within which actors can respond
or create. Similarly, Grandori's (1984) cybernetic mode involves organizational learning within some broad set of goals or objectives.
Bourgeois and Brodwin (1984) also tapped this theme in their framework
that emphasized the role of top management. Again, the first three models
relate to the rationality dimension. The cultural model, however, reflects the
vision theme and interpretive aspects of strategy, with its emphasis on
shared values as moderators of work behavior. Their fifth model (the cres-
cive type), however, taps yet another domain. In this mode, strategy
emerges from the bottom up, with little guidance (analytical or symbolic)
from top management. In this case, organizational members play the critical role in the development of strategy.
Involvement. Several authors have incorporated the theme of involve-
ment into their strategy-making typologies. In Ansoff's (1987) organic, and
Mintzberg and Waters' (1985) unconnected modes, for example, strategic
behavior is mainly unmanaged, and strategy is the result of serendipity.
These modes posit high levels of independent action by organizational actors and show distinct similarities to Bourgeois and Brodwin's (1984) crescive
type.
Shrivastava and Grant (1985) studied strategic decision-making processes in 32 business organizations. Using a combination of quantitative
and qualitative analysis, they empirically derived four prototypical patterns
of strategy making. The first two were described as the managerial autocracy model and the systematic bureaucracy model (comprehensive),
whereas the third was labeled the adaptive planning model (bounded ra-
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tionality). The fourth, identified as the political expediency model, was sim-
ilar to Bourgeois and Brodwin's (1984) crescive model because in this case
strategy resulted from negotiation among decentralized coalitions and interest groups within the organization.
Nonaka (1988) viewed strategy making as an exercise in information
creation and posited three modes: deductive, inductive, and compressive.
Deductive management is driven from the top-down and entails high levels
of central planning and analysis (high rationality, low involvement). Inductive management, by contrast, is bottom-up (like Bourgeois & Brodwin's,
1984, crescive model) and is driven by individual or group initiative within
the organization: Accordingly, the job of top management is primarily to
sponsor projects and make sense of the decentralized activity. Compressive
management combines both the deductive and inductive modes and entails
high levels of activity for both top managers and organizational members.
Thus, strategy making is both top-down and bottom-up.
AN INTEGRATIVE FRAMEWORK
As the literature review indicates, there has been extensive conceptual
development in the area of strategy-making process. Multiple streams of
literature exist. These streams tap several themes that have produced com-
peting or overlapping typologies. None of the individual typologies, however, captures the range of themes and dimensions associated with the
strategy-making process. Instead, each emphasizes only a portion of the
content. Given the fragmented and overlapping nature of the literature, the
field of management would benefit greatly from theoretical integration.
The proposed integrative framework builds upon the current typologies. The framework is constructed around the complementary roles that top
managers and organizational members play in the making of strategy.
Such role definition has generally been implicit in prior literature. Where
roles have been defined, the focus is either on top managers or organizational members, not on how the roles interrelate. From the previous discus-
sion, it can be noted that the role played by top managers can range all the
way from that of a commander, where strategy is consciously formulated at
the top and issued to the rest of the organization (Bourgeois & Brodwin,
1984), to what might be called the sponsor, where strategy emerges from
below and is merely recognized and supported by the top (Mintzberg, 1978).
Similarly, the role played by organizational members can range all the way
from that of a good soldier, in which members execute the plans formulated
by top managers (Guth & MacMillan, 1986), to that of an entrepreneur, in
which members are expected to behave autonomously in the pursuit of new
initiatives (Burgelman, 1983).
The literature shows that people assume a variety of postures in strategy making. Specifying both who is involved in strategy making and in
what manner provides a useful organizing principle for framework devel-
opment. Juxtaposing these roles makes their interaction clear and facilitates
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the identification of distinctive modes of strategy making. To this end, Table
2 specifies five strategy-making modes: command, symbolic, rational,
transactive, and generative. The second column, where top managers formulate the strategy and organizational members execute it, describes a
command mode of strategy making. In such a case, a strong leader or a few
top managers design strategy and push it down in the organization. Top
managers are in control. The third column describes a symbolic mode of
strategy making, whereby the leaders attend primarily to articulating a
mission and creating a vision and common perspective that help guide the
actions of organizational members toward a common goal.
The fourth column, where formal planning systems and hierarchical
relationships predominate, describes a rational mode of strategy making. In
this case, strategy making is seen as the execution of plans produced
through comprehensive analysis and systematic procedure. Top managers
determine strategic direction through a formal planning process that entails
extensive data collection and highly structured organizational member in-
volvement. In the transactive mode, organizational members move to yet a
higher level of involvement in the strategic process. In such a case, top
managers' primary role is to facilitate an interactive process of strategy
formation; the content of the strategy emerges through transactions among
organizational members, suppliers, customers, and key stakeholders. Finally, with the generative mode of strategy making, central direction gives
way completely to internal entrepreneurship, and top management adjusts
the strategy to fit the pattern of innovations that emerge from below.
Top managers, in particular, focus on different priorities for each of the
five modes -they pull different organizational "levers." For example, in the
symbolic mode, top managers focus primarily on the organization's mission
and vision. In contrast, in the rational mode, top managers focus fundamentally upon the firm's goals and competitive strategy and the formal
structure and systems necessary for their implementation. With the trans-
TABLE 2
An Integrative Framework for Strategy-Making Processes
Descriptors Command Symbolic Rational Transactive Generative
Style (Imperial) (Cultural) (Analytical) (Procedural) (Organic)
Strategy driven Strategy driven Strategy driven Strategy driven Strategy driven
by leader or by mission by formal by internal by organizasmall top and a vision structure and process and tional actors'
team of the future planning mutual initiative
systems adjustment
Role of Top (Commander) (Coach) (Boss) (Facilitator) (Sponsor)
Management Provide Motivate and Evaluate and Empower and Endorse and
direction inspire control enable support
Role of Organi- (Soldier) (Player) (Subordinate) (Participant) (Entrepreneur)
zational Obey orders Respond to Follow the Learn and Experiment and
Members challenge system improve take risks
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active mode, top management emphasis is placed on the design and facilitation of effective organizational systems and processes. The organizational
levers available to top management can thus be conceptualized as ranging
from the articulation of corporate mission and vision, on the one extreme, to
concern for informal processes and people on the other, with a range of
levers falling in between. Table 3 summarizes the relationships between the
five strategy-making modes and the associated levers used by top managers.
The five modes of the framework integrate the wide range of literature
on the strategy-making process. Table 4 utilizes the framework to map the
key typologies discussed in the previous section. The command and rational
modes clearly reflect the two different aspects of comprehensive rationality,
whereas the transactive mode contains much of the content from the
bounded rationality category. The symbolic mode reflects directly the vision
theme. Finally, content from the involvement theme is captured primarily in
the generative mode.
The five modes are not seen as mutually exclusive. In practice, organizations may combine two or more modes into distinctive combinations of
strategy-making processes. These process modes and configurations may
have significant implications for firm performance.
Command Mode
Regarding this mode, a strong individual leader or a few top managers
exercise total control over the firm. Strategy making is a conscious, controlled process that is centralized at the very top of the organization (Mintzberg, 1973). The strategic situation is analyzed, alternatives are considered,
and the appropriate course of strategic action is decided upon (Vesper,
1980). In such a mode, strategies are deliberate, fully formed, and ready to
TABLE 3
Strategy-Making Mode and the Organizational "Levers" of
Top Management
Levers Command Symbolic Rational Transactive Generative
Mission
Vision
Goals
*
*
**
Strategy
Structure
Systems
Processes
People
Primary focus
Secondary focus
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TABLE 4
Mapping the Typologies on the Integrative Framework
Citation Command Symbolic Rational Transactive Generative
Allison
(1971)
Rational
Organizational;
Bureaucratic
Nutt (1981, Normative Bureaucratic Behavioral;
1984)
Group;
Adaptive
Mintzberg Entrepreneurial Planning Adaptive
(1973, 1978)
Chaffee (1985) Interpretive Linear Adaptive
Mintzberg Perspective Plan; Position; Pattern
(1987a)
Ploy
Bourgeois & Commander Cultural Change; Crescive
Brodwin
Collaborative
(1984)
Nonaka (1988) Compressive Deductive Inductive
Ansoff (1987) Systematic Ad hoc reactive Organic
Grandori Cybernetic Optimizing Satisficing; Random
(1984)
Incremental
Shrivastava & Managerial Systematic Adaptive Political
Grant (1985) autocracy bureaucracy planning expediency
Mintzberg & Entrepreneurial Ideological; Planned Process; Unconnected;
Waters
Umbrella
Consensus
Imposed
(1985)
be implemented. The top manager is the commander in this mode of strategy making, and organizational members are good soldiers who execute
the strategy as it is articulated by the top (Bourgeois & Brodwin, 1984; Mintzberg & Waters, 1982).
The annals of business history are filled with stories of strong entrepreneurs and business leaders credited with presiding over either the creation
or growth of enterprises (Collins & Moore, 1970); for example, Henry Ford
(Ford Motor Company) and Tom Watson (IBM) have become folk heroes in
both the academic and popular literatures. More recently, people like Bill
Gates (Microsoft) and Steve Jobs (Apple) have attracted a great deal of
attention for their stunning success stories. In each case, a single individual
(or very small inner circle) had a comprehensive business plan and succeeded in imposing it on the organization.
Symbolic Mode
The symbolic mode involves the creation by top management of a com-
pelling vision and a clear corporate mission. The corporate vision gives
meaning to the company's activities and provides a sense of identity for
employees; it defines the basic philosophy and values of the firm (Bennis &
Nanus, 1985; Block, 1988; Dutton & Dukerich, 1991). The use of symbols,
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metaphors, and emotion are central to this process (Conger & Kanungo,
1988; Edelman, 1971; Willner, 1984). NEC's vision, for example, is "C&C,,"
the union between computers and communication, a powerful metaphor
that captures the importance of technological synergy within the firm.
Strategy making in the symbolic mode also requires the crafting of a
long-term mission for the organization-an articulation of strategic intent
(Hamel & Prahalad, 1989). This mission becomes translated into specific
targets, either internal to the organization (e.g., develop capability) or ex-
ternal (e.g., overtake a competitor), which inspire organizational members
to higher levels of achievement (Hasegawa, 1986; Imai, 1986). At Komatsu,
for example, the mission is "Maru-C- to encircle Caterpillar, its primary
rival.
Similar to a coach in athletics, the role of top management in the symbolic mode is to motivate and inspire organizational members (Nonaka,
1988). Through speeches, persuasion, slogans, new projects, and recognition, top management provides the necessary focus and momentum to
guide the creative actions of organizational players (Itami, 1987). In this
way, the symbolic mode creates an implicit control system, which is based
on shared values (Pascale, 1985; Weick, 1987). It hinges on the nurturing of
a shared perspective for all organizational members, that is, a clear mission, shared values, and an emotionally appealing corporate vision or
dream (Torbert, 1987). At Matsushita, for example, founder Konosuke Matsushita developed a grand 250-year vision. The vision was operationalized
through the "Seven Spirits of Matsushita"-the shared values of the com-
pany. Each year, Matsushita rededicates the company's mission to its vision
by weaving its short-term goals into the company dream, captured through
a slogan that serves as the theme for the year.
Rational Mode
Unlike the command or symbolic modes, the rational mode seeks to be
comprehensive in scope. In the rational mode there is a high level of infor-
mation processing-the gathering and use of internal and external data
(Miller, 1989). In such a case, means are separated from ends, and structure
follows strategy (Chandler, 1962). Formal analysis, such as environmental
scanning, portfolio analysis, and industry and competitive analysis, is often
used to aid in competitive strategy formulation (Porter, 1980; Steiner, 1979).
Usually, this process is institutionalized through formal strategic planning,
involving written strategic and operating plans (Armstrong, 1982; Rhyne,
1986; Wood & LaForge, 1979). Organizational members participate in a
formal system requiring the upward sharing of data and information. The
result is a detailed plan of action, including specifics about product-market
scope, competitive strategy, and distinctive competence (e.g., Hofer &
Schendel, 1978). General Electric's highly sophisticated approach to strategic planning, which was developed during the 1960s and 1970s, provides
an example of this mode of strategy making in action. Texas Instruments
and IBM also have received widespread attention for the comprehensiveness of their formal planning systems.
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To ensure effective implementation, top management carefully monitors and controls the activities of subordinates who are held accountable for
performance benchmarked against the plan. Through structure and formal
systems, organizational members are induced to behave in desired ways.
In short, the rational mode is rooted in top management's drive to consider
as much data as possible in the formulation of an explicit business strategy.
Transactive Mode
The essence of the transactive mode is strategy making based on interaction and learning rather than the execution of a predetermined plan
(Fiol & Lyles, 1985). Both cognitive limits (March & Simon, 1958; Slovic,
Fischhoff, and Lichtenstein, 1977) and environmental uncertainty (Dutton,
Fahey, & Narayanan, 1983; Lyles & Mitroff, 1980) serve to limit top management's ability to separate the formulation of strategy from its implementation. Strategy is crafted based upon an ongoing dialogue with key stakeholders-employees, suppliers, customers, governments, and regulators.
Cross-functional communication among organizational members is central
to this mode. Feedback and learning necessitate an iterative approach to
strategy making (Argyris & Schon, 1978). In this case, top management is
concerned with facilitating a process for transacting with key stakeholders
and linking the outcomes of those processes together over time to determine
strategic direction (Mintzberg, 1987b).
The transactive mode is reflected in recent efforts by many companies
to foster employee involvement, customer focus, and total quality manage-
ment (Ishikawa & Lu, 1985; Lawler, 1986; Shapiro, 1988). This mode usually
necessitates the creation of lateral (cross-functional) communication channels and new mechanisms for involving customers and other key stakehold-
ers in planning and decision making. Initiatives common to the transactive
mode include just-in-time management, program management, quality cir-
cles, and quality function deployment. In the United States, companies such
as Motorola, Xerox, and Ford have dedicated great energy to the fostering
of such transactive processes. The Deming Prize in Japan and the recently
created Malcolm Baldridge National Quality Award in the United States are
granted based on a firm's ability to demonstrate strong organizational
learning capability fostered by transactive relationships among suppliers,
customers, and employees.
Generative Mode
The generative mode of strategy-making is dependent upon the auton-
omous behavior of organizational members. Strategy is made via intrapreneurship-new product ideas emerge upward, and employee initiative
shapes the firm's strategic direction (e.g., Kanter, 1983; Peters & Waterman,
1982). In this case, top managers are primarily involved in selecting and
nurturing high-potential proposals that emerge from below (Mintzberg &
McHugh, 1985). Established firms make innovations by behaving more like
small entrepreneurial ventures (Maidique & Hayes, 1984; Quinn, 1985). In
the generative mode, new strategies are germinated by separating inno-
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vating activity from the day-to-day work of the operating organization
(Tushman & Nadler, 1986).
Universities, hospitals, and professional organizations are well known
for their generative properties (Cohen, March, & Olsen, 1972). However, the
generative mode also can be found in industrial and manufacturing contexts. Kidder (1981) documented the generative processes through which
Data General's 32-bit supermini computer emerged. The development of
the "Post-It" note by the 3M Company also epitomizes generative process:
The idea was developed by a research scientist in his leisure time and was
"bootlegged" internally and sold upward in the company. CEO Lewis Lehr
recognized its potential and became its key sponsor. The idea eventually
became a $200 million-per-year business for 3M.
The role of top management in this mode is to encourage experimentation and risk taking on the part of people in the organization and to nurture
the development of the highest potential ideas. This sponsor role is accomplished through a variety of processes such as skunkworks, innovation time,
and the staffing of critical innovation roles designed to encourage individual and team-based innovation (Burgelman, 1984; Peters & Waterman,
1982). Regarding this mode, of particular importance are the identification,
development, and reward of product champions-the people who are able
to link new ideas with organizational resources to make them a commercial
reality (Maidique, 1980; Roberts & Fusfeld, 1981). The generative mode thus
involves the ongoing adjustment of strategy to reflect the pattern of highpotential innovations that emerge from below.
IMPLICATIONS FOR RESEARCH
The posited framework suggests several directions for future research.
As a first step, it will be necessary to operationalize and empirically validate
the five strategy-making modes. Beyond this, attention should be directed
toward (a) determining the link between strategy-making mode and firm
performance, (b) examining the effect of key structural contingency factors,
and (c) exploring effective combinations or configurations of strategymaking modes.
Strategy-Making Mode and Firm Performance
Existing empirical work indicates significant differences between suc-
cessful and unsuccessful firms with respect to strategy-making processes
(Fredrickson, 1984; Fredrickson & Mitchell, 1984; Miller & Friesen, 1977,
1983). The five strategy-making modes developed in this article should also
exhibit significant performance differences. At one extreme (command
mode), top management prescribes desired behavior by dictating strategy
from the top down, leaving little role for organizational members except as
implementers. Organizational members behave more like "sheep" than like
active participants in the strategic process. At the other extreme (generative
mode), top management abdicates strategic control by endorsing and spon-
soring projects proposed from the bottom up and adjusting strategy accord-
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340
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ingly. Strategy results from the action of "wild ducks"-the independent
initiatives of internal entrepreneurs.
With both the command and generative modes, particular organizational skills and capabilities go underutilized. Between these two extremes
are strategy-making modes that combine elements of top-management intention and organizational-member initiative. In these cases, top managers
provide some sense of strategic direction through either symbolic, technical,
or process means, and organizational members are active participants in
the strategic process (see Figure 1). Because the three middle modes make
better use of organizational skills and resources, they should be associated
with higher levels of overall performance than either the command or the
generative modes in their pure form. This leads to the following general
proposition:
Proposition 1 a: The symbolic, rational, and transactive
modes of strategy making will be more predictive of high
performance than will the command and generative
modes.
To render the proposition testable, however, it is necessary to specify
how a firm's performance will be measured. As Venkatraman and Ramanujam (1986) have pointed out, firm performance is a multidimensional
construct. They proposed three general levels of firm performance:
FIGURE 1
Strategy Making Mode and Firm Performance
Command Symbolic Rational Transactive Generative
Role
Top
Role of
of
X
Drto
Management
Control"
Role of C < i~~~~~"Active Players"<
Organizational Seep'_____
Members
Lower - Higher Performance . Lower
Performance
Performance
(erfoleance
(Grea
(Role relative contributions of (Role
imbalance) top managers and imbalance)
organizational members)
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1. Financial performance. Accounting-based measures such as return on assets
(ROA), return on sales (ROS), and return on equity (ROE). These indicators really
tap "current profitability."
2. Business performance. Market-based measures such as market share, growth,
diversification, and product development. There appear to be two dimensions
here: those indicators related to growth/share in existing businesses (i.e., sales
growth and market share) and those indicators related to the future positioning of
the firm (e.g., new product development and diversification).
3. Organizational effectiveness. Stakeholder-based measures such as employee satisfaction, quality, and social responsibility. There seem to be two dimensions here
also: those indicators related to quality (e.g., product quality, employee satisfaction, overall quality) and those indicators related to social responsibility (e.g.,
environmental and community responsibility).
Thus, five dimensions of firm performance are proposed: (a) current
profitability, (b) growth/share, (c) future positioning, (d) quality, and (e) social responsibility. Given the distinctive orientations of the five strategymaking modes, each should relate to particular aspects of performance.
The command mode is not expected to predict firm performance on any
dimension because in this case a significant number of organizational
member skills go underutilized. This mode may, in some cases, even be
negatively related to performance. Similarly, the generative mode is not
expected to bear a significant relationship to performance. In contrast, the
three hybrid modes (symbolic, rational, and transactive) should be strongly
associated with positive outcomes for different dimensions of performance.
These relationships are captured in the following specific propositions:
Proposition lb: Given its emphasis on mission and vision,
the symbolic mode will be positively associated with future positioning and growth/share.
Proposition lc: Given its emphasis on formal planning
and control systems, the rational mode will be positively
associated with current profitability and growth/share.
Proposition 1d: Given its emphasis on feedback and
learning, the transactive mode will be positively associated with quality and social responsibility.
Proposition 1 e: Given its orientation toward total top management control, the command mode will not be associated with any of the performance dimensions.
Proposition if: Given its complete dependence upon employee initiative, the generative mode will not be associated with any of the performance dimensions.
Key Contingency Factors
Empirical work on the process-performance linkage has taken a contingency perspective since the early studies of Miller and Friesen (1983),
Fredrickson (1983), and Fredrickson and Mitchell (1984). This trend has continued to the present (e.g., Fredrickson, 1984, 1986; Fredrickson & Iaquinto,
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342 Academy of Management Review April
1989; Miller, 1987a, 1989). It is clear that future researchers must examine or
control for key contingency factors.
Miller (1987b) has argued that a number of forces restrict organizational
variety and give rise to particular modes of strategy making. He cited four
imperatives that drive strategy making: environment, structure, leadership,
and strategy. Because leadership is captured within the integrative frame-
work, three key contingency factors are proposed-environment, structure
(firm size, stage of firm development) and strategy. Contingencies for these
factors are therefore developed for each of the five modes of strategy
making (Table 5).
Command mode. Because strategy is driven almost completely by the
top manager in the command mode, it is essential that the industry envi-
ronment not be too complex for one person (or a very small topmanagement team) to comprehend. The command mode should, therefore,
function well only in relatively simple situations -a task environment low in
complexity (Dess & Beard, 1984). For the same reason, the command mode
should be found more often in relatively small organizations, where one
person can still maintain effective control. Virtually any competitive strategy
should be achievable through the command mode, so long as the top manager maintains adequate levels of control over the company. Thus, the
following proposition:
Proposition 2a: The command mode will be most prevalent among small organizations in relatively simple environments. Furthermore, the command mode will be associated with higher performance in these situations.
Symbolic mode. Unlike the command mode, which should be limited to
small organizations, the symbolic mode might become necessary in larger,
more differentiated organizations. To be effective, the symbolic mode must
produce a corporate mission and vision that permeate the entire organization. If organizational members cannot be persuaded to share the vision or
if they perceive it as false or superficial, the resulting lack of commitment
TABLE 5
Strategy-Making Modes and Contingency Factors
Contingency
Factors Command Symbolic Rational Transactive Generative
Environment Simple; Dynamic; High Stable; Low Complex; Many Turbulent;
Low-level velocity or degree of stakeholders Dynamic
complexity
radical
change
change
and
complex
Firm Size Small Medium-Large Medium-Large Large No relation
Stage of Firm No relation Rapid growth; Steady growth Mature No relation
Development Reorientation
Strategic No relation Proactive Solidify position Continuous Innovation
Orientation change (Defender) improvement (Prospector)
(Prospector/ (Analyzer)
Analyzer)
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may threaten organizational performance. The mission and vision must
reach everyone in the firm and serve as a guide to their individual behavior. In a dynamic, high-velocity environment (Bourgeois & Eisenhardt,
1988), the symbolic mode may hold the key to the speed and flexibility
necessary for competitive success because in such a case there is little time
for top management to develop detailed plans or formal systems. Furthermore, the symbolic mode may be effective in hostile (low munificence) industries (Dess & Beard, 1984) where change in strategic orientation becomes
essential. Given its emphasis upon mission and motivation for change, the
symbolic mode should be more effective in supporting proactive strategies -prospectors or analyzers-rather than reactive strategies
defenders or reactors (Foster, 1986; Miles & Snow, 1978). Thus, the following
proposition:
Proposition 2b: The symbolic mode will be most prevalent
among either rapidly growing or reorienting firms following proactive strategies in dynamic, high-velocity environments. Furthermore, the symbolic mode will be associated with higher performance in these situations.
Rational mode. Comprehensiveness of analysis is a key feature of the
rational mode, and research has shown that such a strategy-making process functions best in a stable or predictable competitive environment
(Fredrickson, 1983). Because of the great demands placed upon top man-
agement by this mode, the risks of cognitive overload and "paralysis by
analysis" are always present, making the rational mode particularly difficult in dynamic, rapidly changing environments. Indeed, the rational mode
appears to be particularly well suited to firms experiencing steady (as op-
posed to rapid) growth, where the benefits of formal planning and control
systems can be fully realized. Given the level of information processing
required, this mode should also be found more often in large organizations
rather than small, new ventures. Finally, given the time needed to execute
this mode, it should tend to characterize firms that are defending established strategic positions (Miles & Snow, 1978) rather than firms seeking to
innovate or change dramatically. Thus, the following proposition:
Proposition 2c: The rational mode will be most prevalent
among larger, steadily growing firms, defending established strategic positions in relatively stable environments. Furthermore, the rational mode will be associated
with higher performance in these situations.
Transactive Mode. The transactive mode is iterative and participative
in nature; in business environments characterized by high levels of com-
plexity and heterogeneity (Dess & Beard, 1984), such an approach may be
necessary to gain adequate knowledge about and consensus among key
stakeholders. Such conditions might exist in industries with a complex supplier or customer base, and for international firms positioned in a wide
variety of markets. Furthermore, for firms affected by a variety of external
stakeholders, wide participation in the strategy process may be critical to
social acceptance and legitimacy. Given its orientation toward internal pro-
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cess and organizational learning, the transactive mode should be most
common in large firms participating in mature industries. Furthermore,
given the time-consuming and somewhat incremental nature of such a
process, it should support most effectively an analyzer strategy aimed at
incremental product or service improvement (Imai, 1986; Miles & Snow,
1978). Thus, the following proposition:
Proposition 2d: The transactive mode will be most prevalent among large firms following "analyzer" strategies
in mature industries characterized by heterogeneity and
complex interactions among suppliers, customers and
other stakeholders. Furthermore, the transactive mode
will be associated with higher performance in these situations.
Generative Mode. The generative mode depends upon the innovative
activities of organizational members to produce the firm's strategy. The
biggest strength of this mode may also be its greatest weakness-top management exercises very little strategic control over the organization, making
it difficult to engage in any large-scale developments that require central
coordination or "synergy" across organizational units. This mode should
therefore be particularly well suited to firms in turbulent environments,
characterized by both dynamism and complexity simultaneously (Emery &
Trist, 1965). Under such conditions, deliberate strategy making of any kind
may become difficult. Given its orientation toward decentralized entrepreneurship, the generative mode should best support a prospector strategy in
complex and fragmented markets (Miles & Snow, 1978). Thus, the following
proposition:
Proposition 2e: The generative mode will be most prevalent among firms competing in turbulent (complex and
rapidly changing) business environments, where prospecting is important to competitive success. Furthermore,
the generative mode will be associated with higher performance in these situations.
Combinations and Configurations
Although these propositions provide insight into the process-
performance linkage, they are clearly incomplete: They have the advantage of identifying the independent effects of each of the five strategymaking modes, but do not indicate which combinations or packages of
modes work especially well (Hambrick, 1984). As the work of Miller and
Friesen (1984) suggests, it may be more valid to think of firms as possessing
combinations of styles and processes. Each of the five strategy-making
modes represents pure process types that can be blended into different
combinations in organizations. The result is distinctive strategy-making gestalts or configurations.
Several authors have advocated explicitly how desirable it would be to
combine different strategy-making modes, either sequentially (Allison, 1971:
255) or simultaneously (Mintzberg, 1973: 44). Nonaka (1988) articulated a
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strategy-making process where top management creates a vision or dream,
and middle management invents and implements concrete concepts to
transcend the contradictions arising from what exists now versus what top
management hopes to create. This approach to strategy making, described
as middle-up-down, combines elements of both the symbolic and generative modes.
Chaffee (1985) went beyond this approach to suggest that there might
be a hierarchy of strategy-making types, whereby each successive level of
strategy making incorporates those that are less complex. She suggested
that the linear (rational) mode constitutes the first level. The second level,
the adaptive (transactive) mode, incorporates the linear mode, and the most
complex level-the interpretive (symbolic) mode-combines all three together in the form of a gestalt.
Firms that are able to combine several modes into a high "process
capacity" might be expected to perform well on more performance dimensions than single-mode or less process-capable organizations. For example,
a firm that combines the elements of the symbolic and transactive modes
would blend dedication to a shared vision and mission (symbolic) with a
strong learning orientation (transactive). Such a firm should perform well in
terms of growth, quality, and future positioning. In contrast, a firm that is
restricted to the rational mode should show strong profitability, but might be
weaker with respect to other performance criteria.
In short, any single mode by itself may suffer from limitations and biases; combining the different logics associated with the five modes may hold
the potential for fewer blind spots and improved performance (Prahalad &
Bettis, 1986). In general then, the greater the firm's strategy-making capability within each mode, and the greater the number of strategy-making
modes it combines, the higher its performance, which suggests the following proposition:
Proposition 3a: The more the firms are able to develop
capability in multiple strategy-making modes (high-
process capacity), the better their performance on all dimensions.
Not all combinations of modes, however, should yield comparable per-
formance. Indeed, the emerging paradox perspective on organizational
effectiveness (e.g., Bourgeois & Eisenhardt, 1988; Quinn, 1988; Quinn &
Cameron, 1988) suggests that high performance requires a balancing and
simultaneous mastery of seemingly contradictory or paradoxical organizational capabilities-decisiveness and reflectiveness, broad vision and attention to detail, and bold moves and incremental adjustment. In a similar
vein, Pondy (1983) emphasized that executives are most effective when they
combine rational-analytical techniques with intuition.
Strategy-making configurations that combine discrepant or paradoxical modes should therefore be associated with high performance. Conversely, configurations of similar modes should be associated with lower
performance. More specifically, proximal modes (those with more similar
roles for top managers and organizational members such as the transactive
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and generative modes) should tend to occur together in lower performing
firms, whereas distal modes (e.g., command and generative) should be
found together in higher performing firms. This notion leads to the following
propositions:
Proposition 3b: Higher performing firms will combine dis-
tal modes of strategy making.
Proposition 3c: Lower performing firms will combine
proximal modes of strategy making.
SUMMARY AND CONCLUSIONS
This article provides a framework for strategy-making processes that
integrates the fragmented literature on the topic. Indeed, much scholarly
attention has been devoted to the phenomenon of strategy making over the
past 40 years. Many classic works have tackled the question of whether
strategy making can (or should) be rational. Authors also have focused on
the themes of top-management vision and organizational member involve-
ment in strategy making. Thus, most prior literature has focused either on a
particular theme (e.g., rationality) or on one set of actors (e.g., top man-
agement) to the exclusion of others. Resulting typologies have therefore
tended to compete or overlap, but none captures the full range of associated
content.
The roles played by both top managers and organizational members
were selected as the organizing principle for the integrative framework.
Juxtaposing these roles facilitated the identification of five generic modes of
strategy making: command, symbolic, rational, transactive, and generative. This framework of modes and roles was then used to identify several
research propositions that link the strategy-making process to firm performance.
Much work remains, however, to operationalize and apply the integrative framework. Though the five modes appear to be the appropriate level
of aggregation for integrating and reconciling the literature, they still must
be grounded empirically. It is therefore recommended that researchers begin to attempt to develop valid and reliable measures of the five strategymaking modes. Ideally, they should use data collected from both top managers and organizational members in a broad sample of organizations.
Extent of agreement or consensus between the two organizational levels
with regard to strategy-making processes would be a natural outgrowth of
this work (e.g., Wooldridge & Floyd, 1989, 1990).
Once measures of the five strategy-making modes have been established, studies of the process-performance linkage could follow. Extensive
empirical work will be required to examine the research questions and
propositions concerning mode of strategy making and firm performance
developed in this article. To control adequately for the contingency factors
identified, several complementary study designs are recommended (Dess,
Ireland, & Hitt, 1990): Broad, multi-industry survey studies would help to
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establish the general relationships among strategy-making processes and
firm performance. Targeted studies of particular industries and firm types
are desirable to test the specific contingent propositions associated with the
framework. Assuming that firms combine or blend multiple strategy-making
modes into different levels of process capacity, case-comparative (qualitative) research would be a useful and an important means for exploring more
deeply particular strategy-making configurations. Such work might un-
cover how firms combine or blend more than one mode of strategy making
and might clarify how high strategy-making process capacity is actually
embedded in organizations. Ultimately, longitudinal work should be con-
ducted to unravel how strategy-making processes evolve and to discover
how firms acquire capabilities in additional modes over time.
What is clear from the foregoing is that strategy making can no longer
be limited conceptually to the chief executive or the top-management team.
Rather, strategy making must be conceptualized as an organizationwide
phenomenon. Specifying the complementary roles played by top managers
and organizational members serves to clarify how strategy actually gets
made in organizations.
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Stuart L. Hart received his Ph.D. from the University of Michigan. He is an assistant
professor of corporate strategy and organizational behavior at the University of Michigan's Graduate School of Business Administration. His current research interests include strategy-making process/executive leadership, new product development process, technology and strategy, and corporate environmental management.
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