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Weekly UpdatesResearchers have long been interested in the nature of the relationships that elicit superior firm performance. In organizations that manufacture a product, this interest has often centered on the relationships that exist between business-level strategy and the supporting elements of the organization's manufacturing strategies (Buffa, 1984; Hayes & Wheelwright, 1984; Hill, 1985). An aspect of this relationship that has been studied concerns the presence of consensus between SBU-level and manufacturing-level decision makers. This research examines the causal nature of direct and indirect influences that have been argued in the literature to affect manufacturing performance. Our results indicate that consensus on the firm's business-level strategy does not directly influence manufacturing performance, but does so through its influences on other variables. Consensus with respect to manufacturing specific tasks that support the firm's business-level strategy was shown to be important. Additional findings in our research concern the relationship of traditional product-process alignment and levels of manufacturing performance.
THEORETICAL FOUNDATION
Managerial Consensus: Strategic and Manufacturing Task Consensus
A major theme of the literature in strategic management and operations strategy is that consensus on the general strategic direction of the firm and on manufacturing task emphasis must exist between business-level strategic planners and functional-level manufacturing managers for effective business unit performance to occur. It is the responsibility of the manufacturing manager to develop a manufacturing strategy that supports the overall business-unit strategy (Schroeder et al., 1986). Operations scholars have warned that a manufacturing business unit will have a decreased competitive advantage within its industry if it fails to develop a coordinated and supportive operations strategy (Buffa, 1984; Hayes and Wheelwright, 1984; Hill, 1985).
A good deal of research has examined the notion of consensus as it relates to the management process (Bourgeois, 1980; Dess, 1987; Schweiger and Sandberg, 1988; Wooldridge and Floyd, 1989; West and Schwenk, 1996; Homburg et al., 1999). As pointed out by Floyd and Wooldridge (1992), senior managers often complain that middle- and operating-level managers fail to take the correct actions to implement strategy. These implementation problems are deemed to be the result of middle-level and operating managers' lack of understanding of and/or commitment to the chosen strategy. Guth and MacMillan (1986) found that middle-level managers will not only redirect a strategy and delay its implementation, but will also sabotage the strategy if they feel their self-interest is being compromised.
Other research has examined the relationship of consensus to performance. Wooldridge and Floyd (1990) found that the involvement of middle-level managers in the formation of business-level strategy was associated with improved organizational performance. St. John et al., (1991) examined the relationships among various coordinating mechanisms, the degree of consensus between marketing and manufacturing groups, and marketplace performance reputation. They found firms using planning techniques experienced higher levels of interdepartmental consensus and this was related strongly to marketplace performance reputation.
The notion that manufacturing managers should develop a manufacturing strategy that supports the business-level strategy is consistent with the strategic management paradigm. A specific business-level strategy is formulated for the strategic business unit (SBU) in order to create a competitive advantage, and manufacturing managers are expected to translate this strategy into appropriate manufacturing performance goals, processes, and systems.
An issue of concern during this process is the extent to which consensus is developed between managers at the SBU level and managers at the manufacturing level with respect to the overall competitive strategy chosen for the business unit. The manufacturing manager's understanding of, and agreement with, business-level strategic choices will form the basis for subsequent manufacturing strategy development and execution. A unifying strategy is required (Schonberger, 1986) and a vision must be developed so manufacturing managers can clearly understand the requirements for implementation (Chase and Aquilano, 1989). It has been suggested that often this shared understanding does not occur. For example, Hambrick (1981) found evidence of rapid hierarchical decline in strategic awareness by second-level executives. Schroeder, et al. (1986) sampled manufacturing firms and found that only one-third of the firms had formulated a clear and well-developed manufacturing strategy (i.e., one consistent with the firm's busin ess strategy). Swamidass (1986) found evidence of a general mismatch in strategic emphasis between CEO's and manufacturing managers concerning the appropriate role and performance objectives of the manufacturing function.
Hayes and Wheelwright (1984) strongly recommend a high level of involvement by manufacturing managers in the strategic planning process of business units for the attainment of superior competitive performance. Swamidass and Newell (1987) report finding evidence of a direct positive relationship between the level of involvement of manufacturing managers in the strategic planning process and firm performance. Dess (1987) examined the relationship between the degree of consensus within top management teams on business objectives and competitive methods and firm financial performance. His findings indicate general top managerial consensus on either competitive objectives or competitive methods to be positively related to firm financial performance. This finding is consistent with Bourgeois (1980), who found consensus on competitive methods to be related to firm financial performance. A review of other studies related to consensus can be found in Homburg et al. (1999).
Of interest in our research is the relationship between strategic consensus (consensus between SBU-level managers and manufacturing managers on the business unit's overall competitive strategy) and manufacturing performance. As noted by Hart and Banbury (1994), research must take into account measures from the point of view of organizational members, thus a nonfinancial measure of manufacturing performance was selected. Venkatraman and Ramanujam (1986) and Kaplan (1983) have also recommended the inclusion of operational outcomes (as compared to financial measures) with respect to performance. Based on our previous discussions of consensus, the following initial hypothesis can be developed:
Hypothesis 1: There is a direct positive relationship between SBU-level/manufacturing-level strategic consensus (SC) and manufacturing performance (MP).
In addition to speculating that SBU-level and manufacturing-level managers should develop strategic consensus, it is further proposed that consensus with respect to manufacturing-specific task dimensions may be important. Intuitively strategic consensus, or agreement on a firm's business-level strategy, would be a logical precondition for a firm's management to reach consensus on manufacturing strategies because these strategies are developed to support the firm's chosen business-level strategy. Papadakis et al. (1998) suggest that decision-specific characteristics may have the most important influence on the strategic decision-making process. Therefore the following hypothesis is offered:
Hypothesis 2: There is a direct positive relationship between strategic consensus (SC) and manufacturing task consensus (MTC).
Furthermore, it is reasonable to assume that manufacturing task consensus would similarly be related to manufacturing performance and therefore the following hypothesis can be tested:
Hypothesis 3: There is a direct positive relationship between manufacturing task consensus (MTC) and manufacturing performance (MP).
Product-Process Linkage
A fundamental tenant of operations strategy is that manufacturing's choice of production process interacts with marketing's product goals, and this interaction affects the business unit's competitiveness within its industry. Hayes and Wheelwright (1979a,b) first proposed linking product and production process life cycles. Their theory states that the production process should evolve through a series of configurations related to changes in the product's life cycle.
The basis of the product-process alignment literature is that there exists a trade-off, or balance, between attainable levels of automation and flexibility. In the introductory and growth stages, for example, product variety is typically high, requiring flexibility in the manufacturing process. This flexibility, however, is achieved at the expense of higher unit manufacturing costs, as fully automated production processes cannot be employed. As products move through their life cycle, variety and flexibility lose importance, and the firm is able to attain lower operating costs through increased automation.
The product-process matrix described by Hayes and Wheelwright links product life cycle stages with theoretically correct general types of production processes (Hayes and Wheelwright 1979a,b, 1984; Wheelwright, 1984a,b). A firm's product can be characterized as occupying a particular region on the product-process matrix depending on the product's life cycle stage and choice of production process by manufacturing managers. Diagonal positioning on the matrix has been recommended (Hayes and Wheelwright, 1979a,b, 1984; Schmenner, 1985; Fine and Hax, 1985). For example, during the introductory stage of the life cycle, a job shop manufacturing process would be used; during the growth stage, a batch process; during maturity, an assembly line; and during continuance, a continuous process. In response to changes in competitive choices, manufacturing strategies may, by necessity, need to be changed as well in order to sustain the linkage between product characteristics and manufacturing processes (Voss, 1986). This pos itioning and repositioning of the production system in response to changes in the firm's business-level strategy is the primary responsibility of manufacturing managers (Buffa, 1984). Based on this discussion, the following hypotheses are offered:
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