The Effect of Process-Oriented Organizational Design on Firm Performance: A Comparison of Manufacturing and Service Organizations

Abstract

Business process orientation (BPO) is a concept where the firm’s organizational design focuses on business processes ranging from customer to customer rather than on the functional structure. Various authors and studies refer to a positive impact of BPO on firm performance, building the study’s underlying research hypothesis. Although literature in this field is growing, certain gaps still remain. The Master’s Thesis contributes to a greater clarity and better understanding of how BPO influences firm performance in two ways. First, the study respects the multidimensional nature of BPO. The firm’s exhibited BPO degree is measured along the dimensions process knowledge/documentation, continuous process improvement, corporate culture, process owner, management commitment, and process performance measurement. Second, the investigation is performed as a function of industry type in order to identify differences between manufacturing and service companies. For this purpose, Austrian manufacturing and service firms with at least 50 employees were examined on the basis of an online survey. Marketing data served as primary data basis. A pilot test was conducted at the beginning of May 2011 including 500 randomly drawn firms. Due to the rather low response rates, it was decided to directly contact key informants like managing directors or heads of quality management. Data collection finished in the first week of August 2011 with 898 (18.79%) completed questionnaires. As dependent and independent data rely on single-source ratings and therefore potentially suffer from common method bias, a follow-up survey was conducted in October 2011 focusing on the outcome variables financial performance, customer satisfaction, and innovation. This led to a final sample size of 483. After assessing the construct’s unidimensionality, reliability and validity, hierarchical regression analyses were performed. The findings indicate that the culture in line with the process approach is a positive driver of financial performance and customer satisfaction. Furthermore continuous process improvement, the process owner role and management commitment are positively related with certain types of innovation. However, also a negative effect of process knowledge and documentation was discovered. Especially service innovation processes are rather unformalized and unstructured which is grounded in the service nature. Since customers and their needs are directly involved in these processes requireing larger amounts of communication, subject-oriented business process management (S-BPM) could help making these processes more systematic in order to enhance performance.