THE EFFECTS OF STRATEGIC GOAL EXPLICITNESS ON THE FINANCIAL PERFORMANCE OF SMALL AND MEDIUM-SIZE COMPANIES
This field study investigates the degree to which small and mid-size companies establish strategic goals and whether there is an important relationship between the intensity of the strategic goal structure of a firm and its financial performance. Strategic goals are classified in the survey instrument as either explicit or nonexplicit and as either dynamic or maintenance in nature depending on the degree of change that is sought.^ Six independent variables are identified and tested to determine their influence, if any, on the propensity to set strategic goals. These independent variables are: (a) the number of strategic planners; (b) the perception of business complexity; (c) the perception of environmental uncertainty; (d) goal related financial incentives; (e) the size of the company as measured by annual sales; (f) the use of written strategic plans.^ The study sample consisted of usable questionnaire responses from 85 companies across six industries with annual sales ranging from $.5 million to \$69 million.^ The results of the study suggest that there is an important linkage between strategic goal structures that are formalized and corporate financial performance as measured by the average increase in annual sales. A statistically significant relationship was also found between the formulation of dynamic strategic goals and the average rate of revenue increase achieved by a firm. No significant relationship was found, however, between the strategic goal structure of a company and its profitability as measured by ROA.^ The implications of these findings are discussed and a planning model for smaller companies is presented in the final chapter of the report. ^
Business Administration, Management
WILLIAM JOHN FERGUSON,
"THE EFFECTS OF STRATEGIC GOAL EXPLICITNESS ON THE FINANCIAL PERFORMANCE OF SMALL AND MEDIUM-SIZE COMPANIES"
(January 1, 1987).
ETD Collection for Pace University.