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Weekly UpdatesOne of the most important responsibilities of organizational managers in turbulent environments is to impose structure and meaning on ambiguous information (Daft and Weick, 1984). Previous research has demonstrated that the classifications which managers utilize to classify issues have a significant impact on a wide range of actions and outcomes (Dutton and Jackson, 1987; Billings and Scherer, 1988; Rajagopalan et al., 1993; Thomas et al., 1993). The most prominent line of this research has focused on the implications of managers classifying issues as either "threats" or "opportunities" (Dutton and Jackson, 1987). However, "threat-opportunity" is not the only classification scheme used by managers. For example, Cowan (1988) found that managers classified problems in terms of their strategic (as opposed to operational) implications.
Another salient classification scheme utilized by managers that has been the focus of previous research involves the functional classification of organizational issues. Dearborn and Simon (1958), Walsh (1988) and Cowan (1990) conducted studies aimed at discovering the functional labels used by managers to classify organizational issues. These studies found that functional classifications (e.g., marketing, financial, human resource) were commonly utilized by managers. These and other studies found that functional labels are a ubiquitous and influential managerial schema. It is also likely that, in the majority of cases, the classification of the issue under review is a tacit assumption among the decision makers. However, prior research on functional classification schema has failed to propose or establish a link between managers' use of these classifications and their patterns of decision-making behavior.
At issue is whether a problem labeled by managers as, for example, a "finance" problem will evoke the same decision-making behavior as, say, an issue labeled as a "human resource" problem. Given that managers may not be "expert" in every functional area, do they nevertheless make decisions across functional fields utilizing similar decision processes? Or, conversely, does the functional classification of issues make a difference in managers' approach to decision-making activities?
The following section provides a brief discussion of the literature relative to the issue classification-decision process linkage. This is followed by propositions specifically focused on how classifying issues as human resource, marketing or financial impacts subsequent decision-making behavior. The methodology and results of an empirical study which tests these propositions is then presented, followed by a discussion which address the implications of these results for both researchers and managers. A brief conclusion then summarizes the overall study.
THEORY DEVELOPMENT
A number of researchers have presented both theoretical and empirical evidence relative to the impact of issue classifications on decision-making processes (Mittal and Ross, 1998; Ashmos et at., 1998). Three factors -- issue importance, issue complexity, and threat/opportunity--have been shown to have demonstrable effects on managers' decision-making behavior. Overall, this body of research shows that issue classification influences subsequent decision-making processes. However, the impact of a functional classification schema on managers' decision processes has not been theoretically specified or empirically tested.
The functional classifications used in prior research reveal that production, marketing, finance, and human resource represent the most common set of functional classifications used by managers (Dearborn and Simon, 1958; Walsh, 1988; Cowan, 1990; Beyer et at., 1997). One would expect that most general managers will regularly deal with issues from each of these functional domains.
But, do these classifications influence managers' decision processes? In order to investigate the linkages between functional issue classification and managers' decision processes, it is necessary to specify the decision-making process(es) most commonly employed by managers. In an extensive literature review, Eisenhardt and Zbracki summarize their findings by stating that, "Finally, a synthesis of the empirical support for the three traditional paradigms suggests that strategic decision making is best described as a combination of boundedly rational and political insights" (1992: 31). Even organizations populated with utility-maximizing actors can be characterized by political behavior (Freeman, 1999).
In empirically investigating the relationship between political and rational behavior, Dean and Sharfman found that there are, in fact, two independent dimensions of the strategic decision process. As a result, "One need not speak of decisions as rational or political, as if they must be one or the other" (1993: 1077). They further discuss the need to investigate factors that may be associated with the political and rational nature of decision-making processes. The use of different functional decisions as independent variables in this study is responsive to this recommendation.
To summarize, prior research has demonstrated that issue classification impacts decision-making behavior, that functional labels represent a valid managerial schema for classifying organizational problems, and that rational and political behavior represent the best descriptors of decision-making processes. The following propositions specify the linkages between these findings.
PROPOSITIONS
Utilizing the predominant functional classifications from previous studies yields propositions that specifically examine the impact of a functional classification schema that includes human resource, financial, and marketing on the rational and political behavior of decision-making processes.
Human Resource Decisions
Human resource decisions, by their nature, tend to be "people intensive" and, as a result, characteristically involve a substantial degree of personal commitment and involvement by decision makers. Several contextual factors suggest that rationality will be restricted and political behaviors will be common. For example, the unavailability of accepted analytic methodologies by participants, as well as a lack of complete and unbiased information, can be expected to result in a relatively high degree of political decision-making behavior. In addition, since many human resource decisions (e.g., performance evaluations) personally involve the decision makers, it seems reasonable to suggest that they would expend considerable political capital to support their preferred solutions (e.g., Longenecker et al., 1987).
In regard to the question of rational and political behavior, Cowan (1988) states:
"A higher degree of objectivity is thought to be needed for diagnosing technical problems. Human problems, on the other hand, are thought to involve more political than rational behavior and to involve more disagreement and debate in the process of diagnosing and defining them" (1988: 522).
The literature cited above suggests that human resource decisions will exhibit the following relationship between rational and political behavior:
Proposition 1: Human resource decisions will be characterized as having a higher level of political behavior than rational behavior.
Financial Decisions
Financial decisions typically focus on economic or "money-based" issues. Analytic methodologies used to address these issues generally rely on mature paradigms based on well understood and accepted rules and/or formulas for their resolution (e.g., Net Present Value). In this regard, they can be considered as process-based and technical in nature resulting in a potentially higher degree of objectivity when diagnosing such problems (Cowan, 1988). The legitimacy of well established, objective decision-making routines applied to financial issues suggests that these decisions can accurately be described as programmable, systematic and rational.
Financial decisions are also often subject to preexisting boundary conditions demanding rational behaviors (e.g., financial algorithms). Therefore, it is argued that financial issue classifications typically elicit the application of organizational practices that require rational methodologies and restrict political behavior.
Based on this literature, the following proposition is put forth regarding the relationship between the rational and political behaviors used in financial decisions:
Proposition 2: Financial decisions will be characterized as having a higher level of rational behavior than political behavior.
Marketing Decisions
Marketing decisions typically focus on product, price, promotion and placement issues. However, decision analysis has not been a specific topic of interest and research in the marketing management literature (Butler, 1994). As a result, the marketing propositions should be considered more speculative than those put forth for human resource and financial decisions.
The marketing decision-making process is increasingly reflecting the use of sophisticated analytic techniques. In addition, the increasing use of information-based business and market planning for such important marketing issues as new product development, sales objectives, and customer needs analyses provides structure (i.e., rationality) to the decision process. Thus, marketing decisions are becoming increasingly more analytically rigorous and, therefore, rational in their solution approach.
However, marketing decisions must address the multiplicity and interactivity of many internal and external variables which must be considered (Chose and Nazareth, 1994). Contextual characteristics also make it unlikely that marketing decisions can be programmed. Rather, as unprogrammable decisions, marketing problems can best be characterized as "loose" and "messy" (Butler, 1994). Despite the use of simplifying relationships, the decision process itself is likely to be highly involved and complex (Chose and Nazareth, 1994).
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