An analysis of organizational performance in the context of halo error and changing economy standards

Abstract

A major concern in the measurement of organizational performance and the identification of appropriate performance indicators is the role of the halo effect shading judgements and interpretation. Therefore, the first chapter is concerned with the identification of the role of halo error and its influence on company performance as well as other factors. Moreover, halo is categorized accordingly and opportunities to measure and reduce the effect of halo are presented. As the conditions for competition in the markets change, so does the purpose of strategy. Rita Gunther McGrath, author of the book The End of Competitive Advantage, points out that companies will have to set a different focus in their strategy formulation in the future in order to keep up with the competition. This development can also be explained in parts by the shift from the former concept of sustainable competitive advantage to a nowadays rather transient competitive advantage, requiring firms to be able to identify opportunities early and adapt quickly. Consumer habits and expectations are constantly changing thus making continuous innovation and a short-term orientation on an opportunity’s lifecycle a necessity. The second part of the second chapter examines the question of how company performance is defined in the literature, how the same can be measured and controlled, and which other factors besides the halo effect may be influential. In this context the aspects of business performance measurement systems are highlighted and several studies about performance indicators analyzed. Moreover, suggestions for performance improvement according to the approaches of Gunther McGrath and Kotter are presented. The third chapter presents and explains the methodology used to examine which factors influence company performance and the measurement of the same. The fourth chapter examines the performance of selected companies based on the assumptions made by Richard et al. about objective and subjective performance measures in the form of case studies.