Pursuing Business Models and Target Setting: The Interplay between Customized and Uniform Targets
نویسنده
چکیده
In this paper we examine haw target setting help firms to assure that their business models are being pursued. We argue that firms can achieve this objective by taking advantage of what they know about cause-and-effect relations present in their business model. We collect data from a retail firm, whose business model is represented by financial and nonfinancial indicators. The firm sets targets in financial measures targets and those are manager-specific. The nonfinancial targets, however, are uniform meaning that targets are the same for all managers in the firm. We first establish the extent to which the alleged relations in the business model (employee satisfaction-customer satisfactionrevenue chain) are supported by the data. Next we examine how the firm deploys its uniform nonfinancial targets. It appears that a distinct group of managers who failed to achieve these targets are facilitated to achieve them in the next period. Managers whose performance compared to a uniform nonfinancial target is substandard, but better than their peers, are granted wage budget extensions. Awarding managers with additional labor resources, indeed, enable managers to improve their employee satisfaction and customer satisfaction performance, respectively. These results suggest that firms consider nonfinancial measures in the context of costs and benefits, and not in their own right. We thank participants of the workshop held at the Mason School Of Business for their insightful comments.
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