internal integration and company’s performance
DESCRIPTION
The research (Master thesis) is focused on exploring internal integration by using Adizes methodological approach.TRANSCRIPT
ISM UNIVERSITY OF MANAGEMENT AND ECONOMICS
MASTER OF SCIENCE IN INTERNATIONAL MARKETING AND MANAGEMENT
PROGRAMME
Donatas Eigminas
MASTER’S THESIS
Internal integration and company’s performance
Supervisor
Dr. Virginijus Kundrotas, PhD
VILNIUS, 2012
ABSTRACT
Eigminas, D. Internal Integration and Company’s Performance [Manuscript]: Master Thesis: management and business administration. Vilnius, ISM University of Management and Economics, 2012.
Purpose. The purpose of the current thesis was to present internal integration and company’s performance from the perspective of mutual trust and respect culture in an organization and the perspective of perceived performance indicators. The study has been focused to answer the question of how internal integration is related with company’s performance. Design / methodology / approach. This study examines the relation between perceived performance indicators and the perceived internal integration. To measure the relation a questionnaire constructed of two parts has been used. The first part includes a promotional questionnaire provided by a representative of the Adizes Institute (USA). The second part includes the perceived performance measurements, i.e. the perceived revenues and profit in short and long term perspectives. The respondents had to evaluate their companies’ performance and internal integration through their own perception.Findings. The relation between internal integration and company’s performance indicators has been identified. The relation is assumed to be weak but very significant. The research tool has been validated by a specific case in order to support the reliability of the questionnaire. Finally, it has been concluded that the results are reliable and cover a gap identified in the literature and at the same time the implications for practitioners have been uncovered.Originality / value. The research covers a gap in the literature by findings that there is a relation between internal integration and the perceived performance indicators of a company. The research has been done in the scope of Lithuania and that strongly contributes to the internal integration studies done in this country. The overall findings have exploratory implications on the current theoretical frameworks presented by the Adizes methodology.Keywords. Internal integration, mutual trust and respect, external integration, perceived performance indicators.Paper type. Quantitative research.
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SANTRAUKA
Eigminas, D. Vidinė integracija ir firmos efektyvumas ir našumas [Rankraštis]: magistro baigiamasis darbas: vadyba ir verslo administravimas. Vilnius, ISM Vadybos ir ekonomikos universitetas, 2012.
Tikslas. Vidinė integracija ir įmonės efektyvumas bei našumas šiame darbe pristatyti iš bendro pasitikėjimo, pagarbos kultūros įmonėje bei suvokiamųjų veiklos efektyvumo ir našumo indikatorių perspektyvos. Šiuo darbu siekta atsakyti į klausimą, kaip vidinė integracija yra susijusi su įmonės efektyvumu ir našumu. Tyrimo metodologija. Šiame darbe tiriama suvokiamųjų veiklos efektyvumo ir našumo indikatorių sąveika su suvokiama vidine integracija. Ištirti šią sąveiką naudotasi dviejų dalių klausimynu. Pirmoji – reklaminė – klausimyno dalis buvo sukurta pagal Adizes instituto (JAV) rekomendacijas. Antroje klausimyno dalyje respondentų buvo klausiama apie suvokiamus efektyvumo ir našumo matavimus, t.y. suvokiamas ilgalaikes ir trumpalaikes pajamas bei pelną. Trumpai tariant, respondentai turėjo įvertinti įmonių efektyvumą ir našumą bei vidinę integraciją pagal savo suvokimą.Rezultatai. Tyrimo eigoje išryškėjo sąveika tarp vidinės integracijos ir įmonės efektyvumo bei našumo. Šis santykis suvokiamas kaip silpnas, tačiau statistiškai labai reikšmingas. Tyrimo metu sukurtas įrankis buvo patikrintas, kad būtų galima patvirtinti klausimyno patikimumą. Patvirtinta, jog rezultatai yra patikimi ir užpildo literatūroje aprašomą spragą. Gauti rezultatai taip pat yra prasmingi praktikams. Originalumas ir reikšmė. Tyrimas užpildo literatūroje minimą spragą ir patvirtina, kad vidinė integracija yra susijusi su įmonės suvokiamais efektyvumo ir našumo indikatoriais. Tyrimas atliktas Lietuvos kontekste, o tai prisideda prie vidinės integracijos tyrimų, atliekamų šioje šalyje. Tyrimo rezultatai turi tiriamąją reikšmę Adizes metodologijos pristatytose šiuolaikinės teorijos ribose. Raktiniai žodžiai. Vidinė integracija, abipusis pasitikėjimas ir pagarba, išorinė integracija, našumo ir efektyvumo suvokimo rodikliai.Darbo tipas. Kiekybinis tyrimas.
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CONTENTS
LIST OF FIGURES AND TABLES....................................................................................................6
1. INTRODUCTION........................................................................................................................7
2. LITERATURE REVIEW.............................................................................................................9
2.1 Overview of internal integration................................................................................................9
2.2 Internal integration from systemic perspective........................................................................11
2.2.1 Systemic approach by Adizes on internal integration.......................................................11
2.2.2 Systemic approach by Jonker (2004) on internal integration............................................16
2.3 The most researched integration practices...............................................................................17
2.3.1 Supply chain integration....................................................................................................18
2.3.2 Logistics integration..........................................................................................................18
2.3.3 Manufacturing process integration....................................................................................18
2.3.4 External marketing theory applied for internal integration...............................................20
2.3.5 Innovation integration.......................................................................................................20
2.3.6 Enterprise systems integration for the purpose of companies integration.........................21
2.3.7 Technological integration of information integration.......................................................22
2.3.8 Integrating knowledge for the purpose of internal integration..........................................23
2.3.9 Integrated management system.........................................................................................24
2.3.10 Enterprise integration capabilities framework................................................................24
2.3.11 Internal integration problems..........................................................................................25
2.3.12 Economic situation in Lithuania......................................................................................26
2.3.13 Conclusion.......................................................................................................................27
3. METHODOLOGY.....................................................................................................................29
3.1 Introduction..............................................................................................................................29
3.2 Statement of the problem.........................................................................................................29
3.3 Research Questions..................................................................................................................29
3.4 Methodology and Design.........................................................................................................30
3.5 Population Sample....................................................................................................................30
3.6 Instrumentation.........................................................................................................................314
3.7 Ethical considerations...............................................................................................................32
3.8 Limitations of the study............................................................................................................33
3.9 Data collection and data analysis.............................................................................................33
3.10 Budget....................................................................................................................................34
4. FINDINGS.................................................................................................................................35
4.1 Introduction..............................................................................................................................35
4.2 The relation between internal integration and the performance of a company........................38
4.3 The relation between internal integration and the ability to keep competition in high level in a
changing economic environment....................................................................................................49
4.4 What is the required level of internal integration?...................................................................51
4.5 How is internal integration perceived between the people in different positions within a
company?........................................................................................................................................53
4.7 Conclusion of findings.............................................................................................................55
5 DISCUSSION............................................................................................................................57
5.1 Introduction..............................................................................................................................57
5.2 A consideration of the findings................................................................................................57
5.3 Implications for current theory.................................................................................................60
5.4 Findings that only partially answered the research questions..................................................61
5.5 Limitations................................................................................................................................61
5.6 Implications for further research..............................................................................................62
5.7 Implications of the study for professional practice..................................................................62
5 CONCLUSION..........................................................................................................................63
7 REFERENCES................................................................................................................................65
8. APPENDICES................................................................................................................................69
Appendix 1 - tables.........................................................................................................................69
Appendix 2 - figures.......................................................................................................................73
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LIST OF FIGURES AND TABLES
Table 1 The PAEI framework............................................................................................................13
Figure 1 Corporate Lifecycle model (http://www.adizes.com/corporate_lifecycle_overview.html) 14
Figure 2 Conceptual model for developing maps of standards for organizations (Jonker &
Karapetrovic, 2004)............................................................................................................................16
Table 2 The enterprise capabilities framework (Braganza, 2002).....................................................25
Figure 3 Changes of economic indicators in Lithuania according to the Lithuanian Department of
Statistics..............................................................................................................................................27
Figure 4 Analysis strategy used to answer the first research question...............................................38
Figure 5 Relation between internal integration and perceived revenue in short term........................40
Figure 6 Relation between internal integration and perceived profit in short term...........................41
Figure 7 Relation between internal integration and perceived revenue in long term.........................43
Figure 8 Relation between internal integration and perceived revenue in long term.........................44
Figure 9 Comparison (C1) of relations R1 and R3. For more visualized explanation of relations see
Figure 4...............................................................................................................................................45
Figure 10 Comparison (C2) of relations R3 and R4. For more visualized explanation of relations see
figure 4...............................................................................................................................................46
Figure 11 Comparison (C3) of the relations R2 and R4. For more visualized explanation of relations
see Figure 4........................................................................................................................................46
Figure 12 Company classification based on the analysis of the relations R1, R2, R3 and R4...........48
Figure 13 Company classification based on the indicators (SRI, SPI, LRI, LPI)..............................49
Figure 14 Relation between the internal integration and the competitive retention..........................50
Figure 15 Relation between internal integration and competitive retention after verification..........51
Figure 16 Comparison of the LPI, the SPI, the CR1 relations with the CHIR1.................................52
Figure 17 Relation between the CHIR1 and the “Position in the company”.....................................54
Figure 18 Relations between the CHIR1 and the SPI, the SRI, the LPI and the LRI........................55
Figure 19 Integrated corporate lifecycles model into the PAEI framework......................................58
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1. INTRODUCTION
One of the main goals of profit organizations is to generate profit. The main question here is how to
construct the strategy of a company in order to successfully generate money. To answer this
question, correct evaluation criteria has to be defined. This task can be accomplished by using
various criteria. Profit, revenue, economic profit and other derived measurements can assist in
making the assessment of company performance. When the measurements are in place, it is
necessary to determine the correct strategy for generating money. The prevailing thinking on
strategic planning is to achieve profit through effective external integration with market and
customers (providing what is needed by the market and customers using the capabilities of a
company). A presumption exists that in order to assure external integration, a certain level of
internal integration is essential.
In this research an assumption is made that being concerned about internal integration is
the most primary goal within an organization. By internal integration we mean the amount of
conflict and disagreement within an organization that consumes energy and takes it away from the
main focus on the external market. When a company is internally well integrated, it can
successfully integrate externally and generate money. Generally it may be concluded that internal
integration has a direct link with company performance indicators and the strategy of a company
should be constructed focusing very seriously on internal integration as its primary goal.
Profit, revenue and derived indicators are very useful to evaluate company performance.
The indicators are very clear but the methodology of how to measure these indicators is presented
with various problems across different companies. Earning can be related with the risk a company
takes and the kinds of strategies it implements. Furthermore, it becomes more complex when a
comparison has to be done for companies in different business areas. Because of the complexities of
the comparability of companies across different business areas, this research uses perceived
performance indicators.
To measure the level of internal integration, Dr. Ichak Adizes’ methodological approach
has been used. The survey based on the referenced methodology will be used in this study. To
construct the questionnaire for a survey in order to evaluate the level of internal integration, the
sample questionnaire provided by a representative from the Adizes Institute was taken.
This research is exploratory and aims at indicating particular tendencies in Lithuania
proving the impact of internal integration on a company’s performance. The aims of the research
are two-fold: commercial and scientific. From the commercial perspective, the aim of the research
is to give recommendations on how companies can indicate the lack of internal integration and to
determine its correlation with a perceived company’s performance. The aim from the scientific
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perspective is to test the level of internal integration measurement and to relate the results with a
perceived company’s performance measurement.
The research does not have a significant basis if compared with revised research papers in
the current field. There were enough single case analyses of particular companies or research done
in narrow business areas by various researchers. However, a holistic approach, which is applied in
the present study, was not observed to be used anywhere else. That is the main reason why the
construction of a methodological approach was not an easy task to do.
Because of the holistic approach used in the research, the population has been limited by
region. In the current research the profit companies in Lithuania have been taken as research
population and the mixed sample formation approach has been used. The biggest amount of
respondents constitutes a random sample. Invitations to take part in the survey were sent to email
addresses that were publicly available. The companies that accepted the invitation constitute the
sample. A company could decide internally who should fill in the questionnaire according to the
recommendations covered in an invitation letter. Therefore, it may finally be treated as successful
and it was concluded that the expected results were to offer recommendations for companies on
how to assess the essentiality to adjust internal integration strategy. For the scientific world the
expected results were to give recommendations on how to construct corporate strategies.
The paper has six sections: introduction, literature review, methodological approach,
findings, discussion and conclusion. The most important part is the findings where the research
questions are analyzed. In the discussion section the findings section is merged with theory
introduced in the literature review section. Finally, in the conclusion section everything is
summarized in order to have the basic view on the work done.
For survey publishing and data collection the services provided by
http://www.questionpro.com under the license of “Web professional” has been used. For data
analysis the SPSS software has been used.
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2. LITERATURE REVIEW
The current section of the paper is an overview of internal integration and an exploration of trust
and respect as a foundation on which internal integration can be built. The literature review covers a
mutual trust and respect model and other theoretical works. The literature presented internal
integration as an essential driver of external integration and company performance results. The
issues explored are the different internal integration practices that can be used for developing
internal business activities, slightly overlapping external integration activities. The impact of
integration practices is explored to evaluate the balance between internal and external integration
practices that are needed to reach financial goals.
The scope of the literature review extends to the work of founding theorists of internal
integration. Investigation of existing literature reveals a significant gap of research related to finding
the balance between internal and external integration practices, especially in Lithuania. A short
review of the economic situation in the past three years is presented so that results could be
interpreted in a more practical way. The number of studies that examine internal integration and its
effect on company performance results is relatively low. Past research papers have mostly been
carried out using case study design and that is the reason why they lacked generalization. Although
references to literature show a gap of intensive research efforts around internal integration as the
essentiality for external integration, the study was based on sufficient solid theories and concepts in
order to cover the gap and investigate the internal integration and the impact on a company’s
success.
Literature search was conducted through online libraries Emerald and Ebsco. The search in
the databases has been done using keywords internal integration and internal marketing. The two
gaps have been identified. The lack of empirical studies on internal integration as essentiality for
achieving company’s performance results has been identified. Also the lack of generalization has
been identified because most of the studies have used case study research designs. Most of the
literature was considered from the perspective of profit organizations, revealing a gap of empirical
research on the impact of internal integration to company’s performance results. No one research
has been done in Lithuanian companies. Lithuanian scientific sources ore not considered as reliable
in international context, therefore, Emerald and Ensco online databases have been used.
2.1 Overview of internal integration
The reviewed literature suggests a few interpretations of the term internal integration. Researchers
have more or less the same perception of the term and interpret it as inter-functional or systemic
integration. Practitioners have a more concentrated perspective by pointing out the most significant
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aspects of organizational operations. Various authors that combine both perspectives mutually agree
that communication is an enabler of internal integration. In their opinion, both positions form the
real interpretation of internal integration.
Communication as an enabler of internal integration is agreed to be an essentiality by
authors from both perspectives, it is only the significance that varies since communication processes
can be influenced by different structures and processes. The more complicated they are, the more
influential the role communication has in the context of company integration. Less complicated
communication integration examples can be met in flattered organizational structures. More
complications in integration communication can cause integration of operations vertically or
horizontally. It can be concluded that communication is a real enabler of integration because in
order to start integrating something, first of all communication needs to be established with some
party (Teixeira, Koufteros, Peng, Schroeder, 2010).
Adizes (1992) and Jonker and Karapetrovic (2004) suggest that internal integration should
be interpreted from the systemic perspective by looking at an organization as single eco system.
Persona (2004), Rinehartet (1989) and Griffin and Hauser (1996) suggest thinking of internal
integration as an inter-functional integration. Inter-functional integration enables the exchange of
information. Koch (2011), Gimenez (2006), Gustavsson (2008) and Wong (2011) consider
information integration as an enabler of overall integration. All these authors have something in
common but the most significant difference is that they are explaining internal integration in
different levels.
The list of researched integration practices has been identified: manufacturing processes
integration, supply chain integration (Topolsek, 2009), information and knowledge integration,
integration of new product development process, communication integration, project management
integration, company management and decision making process integration, emotional intelligence
integration, enterprise systems integration, strategic goals integration, logistics operation
integration, marketing integration and innovation integration. The assumption can be made that
these practices are the most important areas that are connected with internal integration.
The practices that are most researched in the field relate to internal integration and interpretations of
internal integration can be considered as a basis of constructing the definition of internal
integration. For the purpose of this research new definition is proposed: company internal
integration is a life-long process of developing a company as a closed system by paying the most
attention to most significant elements in order to be best prepared for achieving externally oriented
goals.
The definition is related with a systemic approach in the way that changes done in one area
should not significantly harm any other organization areas. Generally talking, internal integration
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shows how healthy the company is (Adizes, 1992) as a separate eco system (similar to a body) and
how well it is prepared to compete. Practical research is focused on the elements that are the most
crucial for company operations so the definition is constructed to reflect this opinion. After all, a
flexible definition is created that can be supported by different perspectives.
2.2 Internal integration from systemic perspective
Internal integration from a systemic perspective covers very general areas. To explain this
perspective, the Adizes (1992) theory of organizational culture of mutual trust and respect will be
used along with the methodology proposed by Jonker and Karapetrovic (2004) that corresponds to a
systemic approach. Both methodologies are very different. Adizes (1992) proposed the structured
approach of how to analyze a company. Jonker and Karapetrovic (2004) suggested using certificates
in order to inherit best practices, and for that purpose they propose conceptual framework. Very
different approaches have the same aim, i.e. to integrate the company internally as the whole system
in order to integrate externally and generate short-term and long-term superior financial results.
2.2.1 Systemic approach by Adizes on internal integration
Adizes developed a full methodology of how to integrate and manage a company (Adizes, 1979,
1988, 1992, 1997, 1999, 2004 a, b, c). Adizes’ “company success equation” is one of the theories
that can be used to understand the importance of internal integration. Mutual trust and respect
theory can be applied in the analysis of a company’s internal integration. Corporate lifecycles can
be used to evaluate company state in the corporate lifecycle. Management styles (PAEI) of the
Adizes framework (2004 b) can be used to create teams that can make decisions efficiently and
effectively in short and long terms. Coalesced authority, power and influence (CAPI) framework
can be used for predicting obstacles that can be encountered by management. The Corporate
lifecycle theory emphasizes on most appearing challenges that a company faces in a particular
stage. To explain all the theories would significantly increase the scope of the research, therefore,
only the theories that can be mostly applied in integrating company internally will be analyzed.
The equation Company success= external marketinginternal marketing
(1) is used by Adizes (1992) to
explain the importance of internal integration. The equation has three variables, which have to be
explained in the context of profit organization. The most commonly agreed purpose of profit
organization is to generate profit. That is why “Company success” can be perceived as profitability.
To reach the profitability needed a company has to burn some energy that is on the right side of the
equation. The more energy a company has, the more profitable it can be. The numerator of the
function represents external marketing. That can be thought as external integration. The assumption
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is that the more energy can be put to integrate externally, the higher the profitability can be
achieved. The inverse situation is with internal marketing. Internal marketing is the inverse to
internal integration. The assumption is that the less energy is wasted to integrate internally, (internal
marketing is smaller) the more energy can be left to integrate externally (more energy is left for
external marketing) and at the same time higher profitability can be reached. Further in the present
study the terminology by Adizes (1992) will not be used. For that reason new equation with general
definitions is created. The denominator had to be changed because internal integration and internal
marketing has inverse meanings in the perspective of the energy used.
Profitability=External∫ egration
1Internall integration
(2)
Adizes (1992) suggests using mutual trust and respect (MT&R) theory to analyze the
possibilities of internal integration. Respect is explained as a short term internal integration goal and
trust is explained as a long term integration goal. In each period a company has to be efficient and
effective in order to be internally integrated. Efficiency refers to the ability of doing things very
well and effectiveness refers to the ability of making correct decisions (Adizes, 1992). MT&R
theory is explained in four dimensions of people, shared common goals and vision, processes and
structures. To keep internal integration in sufficiently high level people have to share a common
goal and vision. Processes and structure have to be constructed in such a way that people could
reach what they have to. One of the most important dimensions are people, because they decide
what structure to implement and process to use in order to reach the desired goals.
Ghoshal and Gratton (2002) indirectly, although strongly, support the MT&R theory. They
have concluded that when peers work together as a team by supporting each other, the best results
are reached. In theory there are known decision-making processes (top-bottom / bottom-top), some
being more flat and others more hierarchical. However, the essence for managers in the company is
to choose the right one. Ghoshal and Gratton (2002) achieved better team work performance
through social integration.
Going more deeply, Adizes (1992) elaborates on team work by talking about complementary team
approach. Complementary team approach can help managers in choosing the right people in
decision making process.
The PAEI framework (see Table 1 below) can be used for the construction of a decision
making team. The assumption is that not all people are able to do certain tasks or, for instance,
someone may do certain tasks significantly better than someone else. Adizes (2004b) agrees that it
is almost impossible that one person could have all the characteristics. Therefore, a complementary
team has to be formed in order to make decisions in all four cases as displayed in Table 1. That does
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not mean that a team has to be formed of four people but rather that teams should have people that
can significantly complement a decision making process in all the cases.
PAEI framework Effective Efficient
Short-term orientation Producers Administrators
Long-term orientation Entrepreneurs Integrators
Table 1 The PAEI framework
All four types are characterized by specific abilities. These abilities contribute to the ability
to make decisions in long and short time. The same is with the efficiency and the effectiveness.
Some people can work more effectively by doing what is needed and some people can work very
efficiently and do something very well. These styles are described by Adizes (2004b).
Producers are focused to do work immediately and mostly they are result-oriented. The
most significant reward for them is a completed task. Task-orientation by the “P” types can be
hardly understood by both the “A” and the “I” types. Producers are concrete people who can stand
uncertain situations. Because their time focus is immediate, they cannot stand the future oriented
“E” type of people. Producers are the most valuable for a company when the time comes to stop
talking and get things done. In conclusion, producers are the type of people who can work
effectively in a short-term period (Adizes, 2004b).
Administrators are process-oriented and mostly make decisions based on past
achievements. By the meaning of “process-oriented” they are more concerned about how to do
things. They can stand uncertain situations and that is why they need to have detailed information
about things done. By saying “no” they usually mean “maybe”. The “A” types are most valuable
when a company is in chaos. They can create processes and stabilize the situation in short term. In
conclusion, administrators are the type of people who can work efficiently in short-term period
(Adizes, 2004b).
Entrepreneurs may be called dreamers. They are very valuable for companies that create
innovations. The “E” type, in a similar way as the “P” type, is result-oriented but the scope of
problems they can cover during a decision-making process is very wide. They can think globally
and by thinking globally they can make decision in a long-term perspective. That means that when
major changes have to be done, the “E” type advice is relatively the most valuable. In conclusion,
entrepreneurs are the type of people who can work effectively in long-term period (Adizes, 2004b).
Integrators have to keep an eye on the other three types. Their time focus is present, which
means they have to assure that company operations go smoothly in a long-term period. They can
assure company efficiency in a long-term period.
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The explained managerial styles (the PAEI framework) give some recommendations as to
what characteristics a person should have in order to perform certain tasks. Also, it gives
implications as to what kind of managers should be in companies with specific needs. The
classification of managerial styles is a starting point and further Adizes (2004b) talks about the
combinations of styles that are needed to form a complementary team. The classification of the
mismanagement styles can be very useful for the understanding of the PAEI framework. Overall it
is seen that the integrator’s style is crucial for the integration of a company because they bind the
other three parts to sustain a strong decision making core in a company.
Figure 1 Corporate Lifecycle model (http://www.adizes.com/corporate_lifecycle_overview.html)
The corporate lifecycle theory is another model that is designed in order to classify companies. In
Figure 1 above companies are classified in perspective of the challenges that companies encounter.
The model presented by Adizes, (2004d) has the following main stages listed below:
1) Courtship – a company is not established in this stage but the concept is born in the
minds of its founders. A company can go into two directions. It can go to the infancy
stage or the affair stage. The affair stage means the end of a company.
2) Infancy – the founders of a company take financial risk. As with a newborn, they have
to work out the most necessary things, which is the reason why companies in this stage
have to be action-oriented and opportunity-driven. If a company succeeds to cope with
various problems at the infancy stage, it will go to the go-go stage. Otherwise, a
company’s life ends at the infant mortality stage by not being able to do the
obligations.
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3) Go-go – a company is characterized to have the successful product and the sales are
growing at a significant level. Such companies are sales-driven and have good appetite
for growth.
4) Adolescence – in this stage a company is born one more time. This birth is emotional
because company drivers change and a company needs to recreate its identity
independently from the one that its founders have previously provided. For a company
this stage means the decentralization of authority, the displacement of goals and a
change in leadership style to the direction of professional management. In such stages
usually systems to monitor and manage company operations are implemented. In this
stage a company can go to prime stage or be led to a divorce stage that is explained by
the unmet expectations between professional management and entrepreneur.
Depending on who wins, a company can go back to its go-go stage or to premature
aging when professional management pursues the direction.
5) Prime – the optimal stage when a company is in balance between control and
flexibility. In this stage a company is considered to be the healthiest, however, some
signs of disintegration might be indicated.
6) Stable – a company starts loosing flexibility because its founders feel confident and
start aging to some extent. A company is cash-rich and that is one of the reasons why
management can lose its wakefulness.
7) Aristocracy – a company can be classified as cash-rich and have strong financial
statements. It invests in employee satisfaction, control systems, benefits and becomes
for financial statement driven and loses the entrepreneurship style.
8) Early bureaucracy – can mostly be explained by the term “witch hunting”. This is the
state when everybody in a company is busy and a lot of energy is wasted in the process
of finding the guilty ones. In this stage a company looks healthy internally but the real
situation is different because everybody is not telling what they really think. The
outcome of such situation is that a company begins to experience a decline in
performance.
9) Bureaucracy – a company should die at this stage but because of artificial life support,
it still functions. A company in this stage is able to show financial results that could
keep company alive without financial injections. Many regulations, policies and rules
are created and that concludes in low internal integration.
10) Death – a company is sustained by external financial injections in long term.
Governments are usually the sources that keep such companies alive because these
companies employ a lot of people.
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Summarizing the Adizes methodological perspective it can be concluded that the success equation,
the MT&R and the PAEI frameworks can be very useful in internal integration process. The success
equation can be used to understand the need of internal integration. The MT&R theory can be used
as a starting point for analyzing a company and the PAEI framework can be used in assessing
abilities of a decision making team to make effective and efficient short-term and long-term
decisions.
2.2.2 Systemic approach by Jonker (2004) on internal integration
Jonker (2004) discusses the need to look at integration issues as a whole picture. The author raises a
problem that there is no present framework how to integrate an organization and emphasizes the
need of the methodology for company integration. That appears to be very comprehensive but, in
fact, contradicts with what Adizes (1979, 1988, 1992, 1997, 1999, 2004 a, b, c) has proposed (his
frameworks and methodologies). Nonetheless, this source is worth analyzing because of a different
approach used in systemic thinking. What Jonker also did was to ask a question what the required
integration levels are (Jonker, 2004). This question tangibly refers to one of the main question of
this research.
Jonker (2004) proposes to use standards (for example, ISO 9001:2008 is the standard used
for quality management systems) as tools that can be used for company integration. There is a
variety of standards like quality assurance, social responsibility, safety or auditing. A lot of
standards create uncertainty for management. In this place Jonker (2004) emphasizes the need of
conceptual model that could be used by companies in order to choose the right collection of
standards. He proposes the model constructed by Karapetrovic and Willborn (presented in Figure
2). The model is based on five stakeholder groups and can be used as a check list to figure out all
areas that can be standardized. This model is constructed to full company’s integration by taking
external and internal at once.
16
Figure 2 Conceptual model for developing maps of standards for organizations (Jonker & Karapetrovic, 2004)
Each arrow can be considered as a potential area for standardization. The process map is a
conceptual framework based on which standard application methodologies can be applied. The
methodology corresponds to a rectangle in Figure 2. The rectangle includes initiatives: determine,
design and plan, acquire, deploy, implement and evaluate. Going on by one these initiatives
constructs a cycle that can be used in the processes of standard implementation and decision
making. The proposed approach is quite general and unfortunately does not always satisfy
practitioners, according to Jonker (2004).
Jonker’s (2004) approach can be applied using Adizes methodologies and frameworks.
There is no contradiction between these two authors. The Adizes (1992) approach is more general
and Jonker (2004) tries to determine something more tangible, mostly he is looking for best
practices. Therefore it is not surprising that Jonker (2004) raises a question about the required
integration levels. From this question another one can be derived, namely about the required level
of the internal integration, which refers to the main question of this research.
2.3 The most researched integration practices
The reviewed literature does not focus on exploring external integration. The focus has been on the
internal integration and how to exploit it in order to achieve external integration and company
success. External integration is thought to be a more direct path to company success, but the
presumption is to achieve internal integration first. Such position is met in most of the articles, for
instance Topolsek (2009), Teixeira (2010), Stank (1999), Heywood (2006), Akhter (2006) and
others. Further literature explorations in most cases cover both internal and external integration.
Enough evidence has been found that internal integration is an enabler of external integration and
that is why further explorations concentrate on internal integration.
17
A list of researched integration practices has been identified: the manufacturing processes
integration has been researched by Persona (2004), the supply chain integration by Topolsek
(2009), the information and knowledge integration by Gimenez (2006), the integration of new
product development process by Koufteros (2005) and Nakata (2010), the communication
integration by Braganza (2002), the project management integration by Shenhar (1990), the
decision making process integration and the emotional integration by Ghoshal (2002), the enterprise
system integration by Jonker (2004), the strategic goals integration by Vargas (2010), the logistics
operation integration by Closs (2003), the external marketing theories applied for internal
integration tool by Davis (2001), the innovation integration by Brühl (2010) and the technological
integration. The listed practices are the most researched ones and that is why such assumption can
be considered. The listed practices are the most important areas in the context of internal integration
according to the literature of today. Most of these practices are going to be analyzed in more depth.
2.3.1 Supply chain integration
Supply chain is one the most researched practices in the context of company integration. Supply
chain integration covers internal and external integration areas to significant extent. There has been
a research carried out by Zhao (2011), who emphasizes internal integration as very significant in
order to reach external integration with customers and suppliers. The research had a very wide
scope of multi industry and multi region research. This case by Zhao (2011) is very significant for
the current study as it corresponds with the assumption made before starting this research.
In addition to Zhao’s (2011) findings, Gimenez (2006) and Wong, Lai, and Cheng (2011)
explored supply chain management and have some implications. The authors imply that the
information integration, as a part of internal and external integration, can help to improve the supply
chain management process but that does not mean that it will improve the cost efficiency. This is
the example of when approach of integrating only information is not sufficient. This means that by
integrating one process independently, the other inter-connected process might cause problems and
the overall external or internal integration level might decrease. The process has to be coherent with
all processes as much as it is possible by not losing overall integration abilities. Making a
conclusion in a simple way it can be said that if the process integration causes reduction of overall
integration, it cannot be treated as an integration practice.
2.3.2 Logistics integration
The articles that were found on logistics integration in the context of internal integration are
considerably old. Some articles are still reviewed because they contribute to similar results by the
authors that analyze other practices. Stank (1999) emphasizes that logistics is extremely influenced
18
by external factors and concludes that information sharing is an essential precondition for good
logistics performance. In addition, Closs and Savitskie (2003) analyze how information system can
integrate logistics performance. Both authors emphasize information integration in order to achieve
logistics integration.
Closs and Savitskie (2003) are worth separating. A significant relation between internal
system integration and customer integration has been identified. The authors imply that measuring
the relation between internal and external integration would give the most benefit. Finally, they
conclude that internal integration improves customer service performance. And this is the case
when direct relation between internal integration and performance indicator is identified.
2.3.3 Manufacturing process integration
Several articles have been reviewed that explore integration in manufacturing process. Koufteros,
Vonderembse and Jayaram (2005) measured the relation between new product development process
integration and profitability. Nakata and Im (2010) explored expert knowledge integration in the
context of new product development teams. Vargas, Cardenas and Matarranz (2000) carried out a
research in the scope of manufacturing sector. Gustavsson (2008) explored the information quality
management in the context in manufacturing control process. Persona, Regattieri and Romano
(2004) explored manufacturing control process in fast changing competitive environment. In
summary, all the authors talk more or less about the same implications and the age of the article
does not condition significant contradictions.
New product development process (NPD process) in the context of internal integration in
manufacturing companies takes a significantly important place. That is significantly supported by
Koufteros, Vonderembse, and Jayaram (2005). They determined a significant relation between the
NPD process integration and profitability. Looking at it in more depth, they measured the relation
of NPD process integration with external integration. Not surprisingly, they have found that internal
integration is an enabler of external integration. However, they conclude that mutually internal and
external integration loses the relation.
Several years later Nakata and Im (2010) explored an NPD team as a separate entity in a
company. They explored the integration of NPD teams through knowledge integration. As may
have been expected, the results showed that such model does not function. The authors came to a
conclusion that a single unit of a company cannot be integrated separately because such type of
integration causes disintegration in a company context. Similar conclusions were reached by
Gustavsson (2008), saying that the integrated process approach is not sufficient and inter-process
integration has to be used at the same time.
19
Vargas, Cardenas and Matarranz (2000) carried out a research in the scope of
manufacturing sector. The research can be treated as outdated, but it can be justified because it was
of large scope. The researchers explored the Spanish manufacturing sector. The aim of the research
was to separate the most influential integration practices. The findings show that the most
significant practices had been internally oriented. The authors conclude that there is a great reliance
that companies still place on internal rather than external integration activities as means of
achieving their strategic goals. (Vargas, Cardenas & Matarranz (2000).
Persona, Regattieri and Romano (2004) explored manufacturing companies in a fast
changing competitive environment. They describe such environment by high product variety, low
volumes, customization, long lead times and uncertainty. They support the assumption that in order
to be competitive in such environment, high level of internal integration has to be achieved. In
contrast, they have identified crucial areas that have to be managed in order to keep internal
integration in high level. Such areas are inter-functional integration, problems with data and project
management. The most significant of their identified problems was the lack of unifying model of
how to operate in such environment. All this can be closely aligned to the purpose of internal
integration. Problems are part of company’s life and the day without problems might never come.
To be internally integrated means to be best prepared for any changes in the context of competitive
environment.
2.3.4 External marketing theory applied for internal integration
Davis (2001) proposed to apply external marketing theories in order to integrate a company
internally. The literature source may be considered to be outdated but the perspective is very
different and that is the reason why it is worth mentioning. The concept can be explained using a
simple example. By using integrated marketing communication framework, a plan on how to
capture target group of customers can be created. Davis (2001) suggests looking into the internal
microclimate of a company from the same perspective as external environment and calls this
approach internal marketing. The term of internal marketing in the context of internal integration is
used in the Adizes (1992) methodology. The terms used are the same but interpretation differs
fundamentally. In conclusion, the assumption can be cleared out according to Davis (2001) that the
internal environment of a company should be treated as its external environment.
Several years later Torp (2009) implied integrated marketing communication to be used for
internal integration. The integrated marketing communication theory is very closely related with
external integration. However, the authors have one interesting implication: they imply that the
integrated marketing communication theory can be useful in building corporate culture. They
resolved that some people had been willing to identify themselves as citizens of the corporation. It
20
can be concluded that approach has been tested at longitudinal extent and that is why it can be
treated seriously.
2.3.5 Innovation integration
Hislop (2003) states that the “innovativeness of organizations is closely related to their ability to
absorb and utilize external knowledge”. Brühl, Horch and Osann (2010) assumed management
control process as an enabler of innovation integration and Koch (2011) supports Hislop’s position
in the way that the ability to innovate is closely related with the presence of competitive knowledge
base. Finally, it can be said that there is no contradiction between authors.
Project management can be treated as one of the most significant areas for innovation
integration because nowadays projects constitute a bigger and bigger portion in corporate operations
trying to implement competitive products and services. Companies are more flexible by adapting
their structure and processes to changing environment by using projects. Shenhar’s (1990) research
recovered project types in dimensions of technological uncertainty and system complexity. What he
wants to say is that a single project management methodology cannot be used by default for any
project. This is not a new assumption nowadays. The source is rather outdated but is very useful in
order to understand the complexity of present day projects. Projects do not become less complex or
less technologically uncertain; they become more and more dependent on knowledge integration.
Hislop (2003) and Koch (2011) agree that the management of knowledge in an
organization leads to better capabilities in innovation integration. Innovation is a much desired
outcome from the activities of a company. That helps an organization to stay competitive and helps
to assure higher operating margins. To foster innovation companies must have the right teams that
could create or develop new products or services using innovative approach. The right team must
have a competitive knowledge base (Koch, 2011). Not always can a company have or be aware of
the fact that it has the necessary combination of resources. That is why knowledge integration has to
be taken into account seriously, especially for companies that concentrate on creating or
implementing innovations.
Brühl, Horch and Osann (2010) explored management control process for the use of
innovation integration and at the same time integrating operations. The authors conducted a
qualitative research that covered cases of eight companies. They succeeded in indicating three
dimensions that can be used in analyzing innovation integration. Organization, communication, and
management control are these three dimensions. These dimensions are very abstract and it would be
quite difficult to apply them in practice. Brühl, Horch and Osann (2010) gave ground for the
implications that higher management control gives higher control intensities in innovation
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integration. This implication is very important because it verifies once more that integrating one
separate process can lead to decrease of overall company integration.
2.3.6 Enterprise systems integration for the purpose of companies integration
Enterprise systems cover a significant part of processes and structures in modern companies. The
times when significant percentage of companies went bankrupt because of trying to implement
enterprise resource systems are past. Davenport (2004) points out that smaller companies
implement comprehensive systems in order to integrate business operations and management.
Several researchers, e.g. Davenport and Brooks (2004) and Dechow and Mouritsen (2005) have
emphasized an important implication on embedment of disintegrated practices to enterprise
systems. A few years later Elbanna (2007) supported those implications.
Davenport and Brooks (2004) researched enterprise resource systems (ERP systems) as a
tool for the optimization of supply chain management. They noticed that smaller and smaller
companies are implementing ERP systems. That closely aligns with the implications that the ERP
gives the most significant increase of performance results. Literally it pays off fastest comparing to
other process integration in a company with the help of ERP. The implementation of the ERP
system is very costly and does not lead to higher competitiveness. That is why the payoff has to be
calculated very carefully. Finally, Davenport and Brooks (2004) concluded that the ERP system
functions should expand more in the context of external integration.
Dechow and Mouritsen (2005) concluded that the ERP system is not the property of the
specific (accounting) function, but it is the “collective affair were local control issues in different
parts of the organization are used to create notions of global management”. They emphasize one
implication that the ERP system is aimed at integrating a company but does not define integration
by itself and vice versa, the control cannot be analyzed without analyzing technical ERP system
details because the ERP comes with predefined structure and processes. This case shows that by not
defining what integration is the ERP system gives standardized structure and processes that can
change or even disintegrate the state of a company.
Elbanna (2007) supported Dechow and Mouritsen (2005) to significant extent by implying
that the worst thing that can happen to a company is when an integrating system embeds a
disintegrated practice. In simple, disintegrated process is implemented into the system which is
aimed to integrate the company. Disintegrated practices have to be identified before starting the
ERP implementation. That is a very important precondition because otherwise those practices will
be implemented in a new system. Finally, Elbanna (2007) remains very suspicious of the fact that
the ERP can integrate the company.
22
The conclusion on the ERP systems as integrators is not very contradicting. On the one
hand, it can significantly increase the performance of a company but on the other hand it can harm a
company. Harming a company means disintegrating it. Disintegration has crucial impact to a
company’s long term performance results. That is why when implementing the ERP system two
things have to be done: the first thing is to assure that disintegrated practices are not embedded in
the new system and the second thing is to assure that a company is aware of the technological
capabilities of the system because the implementation of the ERP also means adapting to some
extent. The two recommendations are essential and should be observed by the company that wants
to increase its short-term and long-term performance results.
2.3.7 Technological integration of information integration
One quite an old article by Allert and Kleiner (1997) implies that the technological integration can
be thought of as the main variable for internal integration. However, they keep on idea that not all
companies need complicated solutions and not all solutions can pay off. Technological integration
can be treated from two perspectives, i.e. the soft technology integration and the hard technology
integration. The hard technology integration means installing the newest technologies and
implementing the most efficient enterprise systems. The soft technology integration is the
technological integration through information integration by having the most recent and up-to-date
knowledge base. To some extent a contradiction can be observed but overall it can be concluded
that the authors imply that knowledge needs to be integrated first. In further explorations knowledge
integration is researched much more in the context if internal integration.
2.3.8 Integrating knowledge for the purpose of internal integration
Heywood and Smith (2006) contemplate that when a company comes into an uncertain operating
area, managers faces with problems. Uncertainty could be classified by two levels. The first level is
locally lacked knowledge and the second one is a wider international level. In both cases knowledge
acquisition has to be managed correctly.
Overall in literature it is agreed that information integration is the crucial factor in seeking
to integrate internally. The target of the information integration is the development of the
knowledge base. Problems incur when knowledge cannot be acquired. Knowledge is an intangible
asset and its acquisition can be complicated because it can take much time and energy. Therefore,
the question is what can be done if knowledge cannot be acquired. The answer is that external
knowledge can be managed in the way that it would be transferred to the company. Such approach
was used by Heywood Smith (2006). They managed stakeholders of the community facility project
in the way that stakeholders would be able to transfer knowledge needed to complete the project. In
23
the project there were organized teams with their main aim of acquiring information needed from
the community members in order to uncover from uncertainty and complete the project
successfully. This is a proper example of internal integration because firstly the project managers
had to reach a sufficient level of internal integration in order to successfully use external integration
opportunities.
Akhter and Robles (2006) emphasize that the lack of knowledge on the international level
is more difficult to manage because “managers have to ask difficult questions such as, what are
their internal competencies and what are the characteristics of these competencies; how do these
competencies provide sustainable competitive advantage and how can these competencies be
transferred to different country markets? Furthermore, managers have to evaluate their own
perception of environmental and behavioral uncertainties“. Thus, knowledge acquisition is much
more complicated in this context and that means that a company has to be very well integrated
internally in order to cope with such threats (Akhter and Robles, 2006).
One of the examples of how the lack of external knowledge can be managed is alliances.
Uncertainty in new operating area can by reduced by coordinating operations with other companies
that operate in the target region. However, an alliance can be a real challenge for companies that
can cause the leakage of information from one company to another. Grant (1996) explains that
knowledge is one of the most valuable strategic assets . Companies have to take care of information
sharing very seriously and that is the reason why a decision to go in alliance has to be supported by
external knowledge-base integration process (Inkpen, 2000). Joint-venture as a very similar concept
to alliance in integration context is addressed by Vargas, Cardenas and Matarranz (2000) as a
disintegration practice. In short, alliances are very risky and success is dependent on the trust level
between companies that are going into cooperation. This is usually addressed as long-term goals
because trust between parties has to be reached to significant extent.
2.3.9 Integrated management system
López-Fresno (2010) explores integrated management system (IMS) in the context of overall
company integration. She implies that the IMS is especially needed in organizations with complex
structures or the ones regulated by strict standards. The IMS is closely related with business
intelligence applications (BI). BI is aimed at helping managers in decision making by giving them
the most comprehensive opportunities to monitor and analyze company performance indicators.
López-Fresno (2010) implies that quality management is very important because the IMS can give
as reliable the results as the data is reliable. According to López-Fresno (2010), to assure data
reliability the data quality assurance standards can be integrated. However, data quality can be an
unattainable challenge for some companies. In this case López-Fresno (2010) adds that it may still
24
be worth trying because by implementing the IMS the following areas can be improved: decision
making, better utilization of resources, enhanced communication, people’s improved motivation,
stronger customer orientation, cultural change and enhanced positive corporate image. The entire
list practices are strongly related with internal integration. Concluding with the IMS, it can be said
that the integration by using the IMS can be achieved in a more comprehensive level.
2.3.10 Enterprise integration capabilities framework
Braganza (2002) presents the enterprise capability framework as a tool for assessing the short-term
and long-term capabilities of a company and at the same time evaluating the impact on strategic
goals and operations. In addition, she explored integration classification perspective. This source is
worth mentioning because it significantly contributes to the overall understanding of internal
integration in the overall integration context.
Braganza (2002) supports the approach of internal integration as inter-functional
integration across departments. In addition, she emphasizes the importance of maintaining co-
operation and communication across functions and indicates that theory and practice are not
coherent. Braganza proposes the enterprise integration capabilities framework that can help to
assess the capabilities of a company in the perspectives of the ability to keep competitiveness and
whether the impact will be felt on strategic or operational level. Table 2 shows four quadrants as the
outcome of crossed dimensions.
Contribution for future Competitiveness
Certain/High “managers are sure that it will lead to improved competitiveness and the consequences enhance or maintain current operational aspects of the organization” (Braganza, 2002)
“managers are confident that the initiative will significantly improve the organization’s future competitive position and the consequences will affect the future strategic direction” (Braganza, 2002)
Uncertain/Low
“important to achieving and avoiding disbenefits in the short-term” (Braganza, 2002)
“managers are unsure of the extent to which an initiative will improve the organization’s future competitiveness or the potential benefits to be gained are uncertain” (Braganza, 2002)
Operational Strategic
Consequences for the organizationTable 2 The enterprise capabilities framework (Braganza, 2002)
Going further, Braganza (2002) concludes that enterprise integration remains the key capability.
Internal integration, as it has been explored in theory, has an extreme impact on the overall
integration of a company. These two facts can lead to the assumption that the enterprise capability
framework can be applied for integrating a company internally.
Braganza (2002) presents three attribute characteristics and the scope and elements that
compose the perspective of how to analyze enterprise integration. The characteristic of a company
is interpreted in the perspective of classical frameworks like Porter’s five forces model and other
macro and micro environment analysis frameworks. The scope attribute takes into account
functional dependencies and broadness in context of cross-departmental relations. The element
25
attributes classify a company into autonomous parts that can be analyzed in more specific ways.
The explained attributes can significantly contribute to the analysis tools of internal integration in
the context of understanding overall integration situation.
In conclusion, the implications presented can significantly help a company to integrate
internally. The enterprise integration capabilities framework and the three attributes are the tools
that can help to assess the overall integration structure. Internal integration has to be adjusted to the
needs of external integration to some extent, the idea that is supported by most authors. It can be
concluded that the presented frameworks are one of the tools that can be used for internal
integration.
2.3.11 Internal integration problems
In the explorations of internal integration, Schein (2002) summarizes several problematic areas
where a company can encounter problems by trying to integrate its internal operations. As the basis
for all problems is miscommunication. Team work, reward systems, decision making models and
uncertainty management and trust are the areas where good communication has to be intact. Every
aspect has to be clearly and consistently communicated on all the company employee levels.
A common language gives ground for better communication. For team work
communication is the crucial part that enables it to define itself (Schein, 2002). When a group
knows who they are, then they can act in seeking the same goal (Adizes, 1992). In addition to that,
a shared vision will help to keep reaching goals in a long-term perspective. Every team has to work
out its style and relationships (Schein, 2002). That means they have to form their own culture that
mostly will be inherited from company level. In order to work efficiently and effectively a team has
to be complementary and must have all the knowledge and capabilities needed (Adizes, 1992).
Before going further, can be concluded that internal integration has to be reached at some extent so
that team could work effectively and efficiently.
An important question when conflicts arise is whether to choose consensus or compromise.
(Schein, 2002). Compromise can be treated as a “lose-lose result out of the conflict” (Schein, 2002)
but can be handled more quickly. Consensus is the opposite. The teams which pursue compromise
as the target in solving conflicts can communicate and work more effectively although the decision
making process is much longer. The “win-win situation” lays ground for seeking common goal
(Adizes, 1992) and more effective decision making, however, less efficient to some extent.
The decision making process is very important when talking about uncertain situations
(Schein, 2002). Uncertain situations force people behave unexplainably and uncontrollably. What
can be done in this case is constructing a complementary team. By having all the knowledge that is
26
needed a competitive team can be constructed that will be able to act against the competitors under
uncertain conditions.
According to Schein, “every group must know what its heroic and sinful behaviors are and
must achieve consensus on what is the reward and punishment system” (Schein, 2002). The reward
system has to be clear and understood well by people. Ambiguities are not desirable when talking
about the reward and punishment system. Mostly it is being talked about the policy implementation
effectiveness and integration of companies goals with the reward system. All cover problems are
just a small part of internal integration variables. The main idea is the same everything has to be in
place. Inter-variable (systemic approach) integration can be thought of as a final purpose within a
company.
2.3.12 Economic situation in Lithuania
This part of the analysis is used for assessing external factors that can influence research results. As
the main factor that can influence survey results are the macro-economic indicators. Different
attitudes to statistical tools can raise ambiguities that have to be addressed in this research. Various
assumptions on statistical tools have to be eliminated. This part of the analysis will be taken into
account when assessing the outcomes of the research.
The research has questions on perceived revenues and profitability indicators. These
questions are split into two categories. The first category assesses the indicators in short-term period
and this short-term period is addressed as the last financial period. The second category assesses
indicators in the long-term period and this long-term period is addressed as the last three years.
Considering the economic background in Lithuania during the last three years can be thought as
exceptional because of the global economic recession and can influence the performance results
significantly. The analysis of the macro-indicators in Lithuania is done according to the information
as provided by the Lithuanian Department of Statistics.
The economic recession in Lithuania started later than in the USA. In Lithuania people
started to believe that the crisis would influence the country at the end of 2008. The most influential
year was 2009 and this was the year when the GDP dropped significantly (by approximately 17%)
and the unemployment rate increased dramatically and the export indicators decreased too. These
were some of the key problems the government had to cope with because the internal consumption
was weak. Figure 3 below shows that the unemployment rate increased much in 2009 and 2010.
What is interesting in that is that in 2011 about 40% of neutral persons with legal status had
resigned that status. At the same time it can be seen that the amount of companies increased by
almost 5%. Concluding the economical overview it can be said that the last three years was a period
of real change and the analysis of perceptions has to be aligned with the situation in the country.
27
2008 2009 2010 2011
-50
0
50
100
150
200
GDP %Export %Unemployment %Companies %Natural person who has legal sta-tus %
Figure 3 Changes of economic indicators in Lithuania according to the Lithuanian Department of Statistics
2.3.13 Conclusion
More or less it is agreed what areas cover internal integration. These areas are systems, structures,
policies, people, resources, knowledge and communication. Some areas, for instance, the system
integration, can be derived from the combination of others. Adizes (1992) and Bititci (1995) agree
that all the listed areas have to be coherent with the strategy of a company, which must define its
vision and goals as a starting point of internal integration. The culture of trust and respect in the
perspective of internal integration is not covered in literature significantly. Adizes (1992) is the
source that covers this the most. In addition to Adizes (1992), Ghoshal and Gratton (2002) cover
trust that can be achieved by emotional integration in order to achieve internal integration. The case
was analyzed where long-term commitment from employees had been achieved. As the authors
emphasize, extraordinary results had been achieved because a company had become a “talent
magnet” and this has been the only case that complements the Adizes (1992) perspective. Good
external integration (from the perspective of possible employees) gave pride to the employees about
the place where they were working. Thus, a self-enforcing loop can be identified here but the first
integration step has to be done internally.
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3. METHODOLOGY
3.1 Introduction
The research developed is designed to provide feedback from the companies on their internal
integration level and relation with company performance. Internal integration is measured from the
perspective of mutual trust and respect using the questionnaire provided by the representative of the
Adizes Institute. In previous studies such method has not been used. To measure the performance of
a company perceived performance indicators are used. A similar approach of perceived
performance indicators has been used by Vargas, Cardenas and Matarranz (2000). To measure the
ability to stay competitive under a changing economic environment (external integration) is
measured using open question. From the qualitative answer the questions have been converted by
expert evaluation to quantitative answer.
3.2 Statement of the problem
Not enough basis has been found in previous studies that internal integration can be achieved
through the culture of mutual trust and respect. Internal integration in most cases is agreed to have
impact on external integration but only in a few sources it is agreed that internal integration has
direct impact on the overall performance of a company. There were enough single case analyses of
particular companies or research done in the narrow business areas by various researchers.
However, only a few researchers have analyzed business sectors using quantitative research design.
29
The holistic approach, which has been applied in the context of culture of mutual trust and respect,
was not observed to be used anywhere else. No significant literature source where Lithuania or a
Lithuanian company would appear as a research object was found. The perception of internal
integration on a different position level in a company was not researched at all. In the literature
review a question of what the required integration levels are has been raised (Jonker, 2004). Among
the listed problems the main problem is that no research on internal integration has been done in
Lithuania.
3.3 Research Questions
The following research questions have been raised from the problems that have been discussed
previously:
1) How is internal integration related with the performance of a company?
2) How is internal integration perceived among the people in different positions within a
company?
3) How is internal integration related with the ability to keep competition in high level in
a changing economic environment?
4) What is the required level of internal integration? The question is derived from Jonker
(2004) who raised the question of what the required integration levels are.
The first question is thought be the main questions of the research, whereas the others are treated as
complementary to the whole work.
3.4 Methodology and Design
A mixed design of case studies and non-experimental quantitative research is used in the current
study. The reason for selecting to apply a mixed design is that a case study provides representative
information on one company level. Such method is needed for testing the reliability of the main
research tool. The main is a quantitative research that provides information on the national level (in
the current situation the Lithuanian level) that is needed to answer the research questions.
For data collection, an online survey has been used. Invitations have been sent through
mailing lists or announced in public space on the Internet. The same questionnaire has been used for
both the case study and the whole research. For the main study the case study results are
summarized and treated as one record.
A company had two choices of how to attend to the research. A company can choose a
representative from the company or attend as a whole company by giving more than one response to
the survey. Companies had flexibility to decide who should fill in the questionnaire. Companies
30
were able to distribute the survey questionnaires in paper if they assumed it was necessary to get
representative information.
3.5 Population Sample
All profit organizations in Lithuanian, are thought to constitute the sample. According to the
Lithuanian Department of Statistics, at the end of 2011 there were 62 thousand companies in
Lithuania that were registered of different types: limited liability companies, stock companies and
government and municipality companies. These types of companies were chosen because one of
their main goals was to be profitable and generate revenues. One of the main questions of the
survey, therefore, was to determine how much is companies internally integrated and how
companies perform in revenues and profit.
Three techniques for selecting the representatives have been used: convenient, snowball
and random. The random sample constitutes 10 000 emails that have been collected randomly by
enterprise information service provider “118”. About 25% of the records have been filtered out,
because those organizations were not considered to be profit organizations (e.g. schools, legal
institutions, municipalities and others).
The mailing lists structure is as follows:
a) The ISM international Master degree graduates since 2007. A list is about 500 students.
Tracked responses.
b) The ISM current students of the Executive School. A list of about 100 students has been
distributed by the ISM executive study unit. Anonymous respondents.
c) The ISM Master’s Club members. A list of about 500 students has been distributed by the
ISM executive study unit. Anonymous respondents.
d) Convenient sample of known people for research group. A list of about 100 people. Tracked
responses.
e) The sample of email lists received from convenient sample respondents. A list of about 100
people. Tracked responses.
f) Top 100 company list in Lithuania in 2010. Tracked responses.
g) Job search engine “CV-Online”. Emails were randomly collected from job proposals. A list
of about 100 emails.
h) About 7500 of random companies of Lithuania.
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3.6 Instrumentation
Four types of questions have been used in questionnaires. The first questions are used to obtain
information about a company. The second type of questions is used to receive company
performance results and the third type of questions is used to measure the internal integration of a
company. The last type of questions is one open question and employee’s position in the company
type. All these questions create a tool that can measure the link between the internal integration of a
company to its profitability and revenues. The specific information about a company is important
for checking sampling errors and has no significant contribution to the main aims.
According to the literature analyzed, to measure the performance of a company is not so
trivial a task. In this case perceived performance indicators on profitability and revenues are used.
For measuring short and long term performance, two question types are used. Profitability and
revenues are chosen because they are the most common and can be perceived by respondents of
different positions. The perceived measurement method is used because a tested method of how to
compare the performance indicators across different industries has not been found.
Internal integration measurement is done using a translated questionnaire that was received
directly from the representative of the Adizes Institute. The questionnaire has 13 statements that
measure overall internal integration from the systemic perspective. They are as follows:
1) Create a win-win situation out of most disagreements.
2) Accept that everybody are entitled to form their own opinion about matters.
3) Do not experience that people pursue their own private agendas ‘behind the scene’.
4) Can disagree without being disagreeable.
5) Give to each other without thinking of getting something in return.
6) Listen to each other to understand each other’s position.
7) Learn from colleagues.
8) Share common goals and vision.
9) Do not intimidate other people’s thinking even if they think differently from us.
10) Serve and support each other.
11) Receive and give honest feedback.
12) Always deal with real issues.
13) Spend no time on internal fighting and positioning.
Some statements refer more to long-term internal integration whereas others refer more to short-
term internal integration. For the purpose of this research, the evaluations of practices which mostly
refer to internal integration have been obtained. The last question is an open question (“How do you
perceive your company’s ability to keep the right competitiveness under changing economic
32
situation”). This question is necessary to evaluate the flexibility of a company in the last three years
period.
Finally it can be said that presented here is a tool that is based on the methodology of
practitioners appended with the questions and applied in the scope of Lithuania, which makes it a
scientific tool.
3.7 Ethical considerations
This research has two ethical considerations one is spam and the other is mailing lists in black
market. Spam is usually considered to be unethical practice and that is the reason why this research
can be thought of as unethical. Mailing lists are marketed in black market and can be purchased
without problems at a low price. These two areas are worth to mention because these are very
important for a research of such design.
Spam is mostly considered as unethical practice. In this case justification can be found.
First, every respondent that attends the survey can get feedback and second, the sample has been
collected randomly and that means that every company had the same chance to fall into the sample.
Third, the size of the sample has been chosen for the purpose of collecting significant sample and
not more. Going further, it can be said that companies could conduct internal integration
measurements and get analysis results for free. According to the model of ethical decision making
methodology proposed by Crane (2010) it has been concluded that sending spam has been one of
the most ethical alternatives. Finally, it can be concluded that sending 7500 random emails with
feedback as benefits should not be considered as spam.
Mailing lists are marketed in the black market at a low price. That might be very attractive
for low budget surveys. A list of 27 000 companies can be acquired for about 300 LTL. That is
quite a significant difference between the negotiated price of 363 LTL for list of emails of 10 000
companies and institutions. The reason why this information is worth mentioning is that the starting
price had been 200 LTL. And such difference might frighten most people. The practice is such that
negotiations took about five days counting from initial request and list of 10 000 emails was
acquired for 363 LTL.
The list was acquired in an ethical way and distributed in a significantly justifiable way.
That is why this research can be thought of as ethical. Moreover, the experience can be taken for
further research.
3.8 Limitations of the study
The research has some limitations. First and the most important one is that the respondents cannot
be identified at 100% as being the representatives of a specific company. The respondent is
33
identified as a unique company if the IP address differs and/or the tracked email address differs.
That is why such situations when two or more respondents work in the same company can occur.
Secondly, the sample has one discussable area, i.e. the representatives of a company can mislead by
giving not representative results. In this place an assumption has been made that managers can give
most representative feedback on questions in the questionnaire. The grounding for this assumption
will be provided in the analysis part of the study when the difference in the perceptions among
managers and others will be measured. This should be kept in mind when applying
recommendations. Limitations are tangible, but do not significantly influence the results of the main
question.
3.9 Data collection and data analysis
The following tools have been used in data analysis and survey condition stages:
1) www.questionpro.com (Web professional license) was used for survey distribution,
monitoring and primary data analysis as well as assessing the response rate.
2) MS EXCEL was used for data processing. Also, data mining and data anonymity assurance
has been done by removing all the data that can identify a company of a specific person.
3) SPSS was used for detailed descriptive and inferential data analysis.
4) The questionnaire of 13 integration questions (used for promotional purposes in
Scandinavian countries) that have been shared by a representative of the Adizes Institute.
Integration questions have been translated into the Lithuanian language. To assure the
quality of a translated questionnaire, a translation quality assurance process of four stages
has been implemented. The questionnaire has been translated by the author of this thesis.
The next step was to test the survey by a few people in order to get the feedback on the
reasonability of questions. The third stage was to use professional translation services and in
the final stage the brainstorming session with the scientific supervisor gave the final
outcome.
3.10 Budget
The research had a budget of approximately 440 LTL. The survey had one sponsor (Valdereza
Lenktaitis) that have contributed 400 LTL. 363 LTL was paid for the random sample (10 000
company emails) purchased from the Lintel company. 30$ has been paid for the survey tool “Web
professional” license provided by questionpro.com.
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4. FINDINGS
4.1 Introduction
The research has been done in the scope of Lithuania and its results can be treated as reliable. The
main aim of the research was to explore the impact of internal integration on a company’s
performance. The term internal integration can be compared to the state of retained energy inside a
company. To simplify, the less conflicts and disagreement are in the company, the less energy is
wasted to handle those disagreements and to solve the internal problems. At the same time, if less
energy is spent and wasted on solving internal conflicts, the stronger inside and internally integrated
a company is. A company’s performance can be understood much more easily and revenue with
profit is used as indicators in this research. These two indicators are measured by perceived
evaluation; talking precisely, the respondents (the people who participated in the survey) had to
evaluate a company’s performance in short and long terms using their own perception. The main
aim of the research can be clarified that the relation between perceived internal integration and
perceived companies’ performance is measured. To explore the relation, a survey has been used.
The survey can be treated as significant (significant at 95% level with confidence interval of 5%)
because 410 respondents from different companies contributed. In addition to that, one company
participated in the survey providing the answers of most of its employees and in such way served as
individual organizational case that permitted to test the reliability of the questionnaire. Such
participation gives enough support to represent the results at the scope of Lithuania and where a
specific company has supported the reliability of the research tool.
The reliability tests of the questionnaire questions show that the questions measure what
they are designed to measure. The questions in the questionnaire can be separated into four groups.
Each group has a specific task. The first group describes various companies by their main
parameters. The second group measures the perceived performances of companies (Cronbach’s
alpha is greater than 0,8). The third group measures the internal integration of companies
(Cronbach’s alpha is greater than 0,8). The last group includes separate questions that refer to the
research questions of secondary importance. The relations between the second and the third
question groups are thought to be the main object of the research, however, any other relation found
is thought to be of no less importance.
The preliminary results are promising because many significant relations have been
discovered (or, rather uncovered) between the questions of internal integration and the indicators of
perceived performance (see Appendix 1 Table 1). These findings strongly contribute to the
explanation of the research questions. On the condition that some findings are explained, some
agreements for notation, terms and abbreviations have been done in order to explain things in
concise and understandable way.
35
Terms and abbreviations:
CHI – Company Health Indicator. The CHI is a compounded values (1 for very bad and 5 for very
good evaluation) of every the internal integration question (see Appendix 1 Table 1). CHI value
can range from 13*1=13 to 13*5=65. Below is the visualization of CHI creation.
CHI
=
Accept that everybody are entitled to form their own opinion about matter+
Serve and support each other+
Receive and give honest feedback+
Share common goals and vision+
Can disagree without being disagreeable+
Give to each other without thinking of getting something in return+
Do not intimidate other people’s thinking even if they think differently from us+
Listen to each other to understand each other’s position+
Create of win-win situation out of most disagreements+
Spend no time on internal fighting and positioning+
Always deal with real issues+
Do not experience that people pursue their own private agendas ‘behind the scene’= [13..65].
CHIR – Company Health Indicator with Reduced amount of the internal integration questions. The
construction of the index is the same as of the CHI, except that one condition has to be met for the
internal integration question. The question must have significant correlations with all perceived
performance indicators (see Appendix 1 Table 1). CHIR value can range from 5*1=5 to 5*5=25.
CHIR1 – Company Health Indicator with Reduced amount of integration questions. The
construction of the index is the same as of the CHI, except that one condition has to be met for the
internal integration question. The question must have one significant correlation with at least one
perceived performance indicator (see Appendix 1 Table 1). CHIR1 value can range from 11*1=11
to 11*5=55.
CRI – Competitive Retention Indicator shows how much a company is perceived being able to
compete in the environment of changing economies. The CR is derived out of an open question.
Question has been answered by 244 respondents. Qualitative answer has been quantified. Three
people evaluated answers of the open question (“How do you perceive your company’s ability to
keep the right competitiveness under changing economic situation?”) by using commons sense in
the Licert scale. The grading has been based on the list provided below:
36
Value 1 – the company is very uncompetitive under a changing economic situation.
Value 2 – the company is uncompetitive under a changing economic situation.
Value 3 – it is difficult to assess the company’s ability in the context of a changing economic situation.
Value 4 – the company is competitive under a changing economic situation.
Value 5 – the company is very competitive under a changing economic situation.
PPI – Perceived Performance Indicator is used to talk about the perceived revenues and profit in
long and short term perspectives. By the meaning of the PPI any of the indicators listed below (SP,
SR, LP, LR) will be referenced. The grading scale is listed below:
Value 1 – the company did not reach the marked goals.
Value 2 – the company was close to the marked goals.
Value 3 – the company reached the marked goals.
Value 4 – the company reached and exceeded the marked goals.
SPI – perceived Short-term Profit Indicator shows how a respondent perceives the profitability in
the last financial period of a company.
SRI – perceived Short-term Revenues Indicator shows how a respondent perceives the revenue
flows in the last financial period of a company.
LPI – perceived Long-term Profit Indicator shows how a respondent perceives the profitability of a
company in the period of the last three years.
LRI – perceived Long-term Revenue Indicator shows how a respondent perceives the revenue
flows of a company in the period of the last three years.
Agreements for notation
The relations that have been discovered are supported by using statistical measurements or
Spearman’s correlations. Therefore, the strength level has to be defined before starting the analysis
in order to have the right perception of the relation applicability to the context of all companies in
Lithuania. The strength levels are suggested by Ratner (2012):
Values between 0 and 0.299 indicate a weak positive relationship.
Values between 0.3 and 0.699 indicate a moderate positive relationship.
Values between 0.7 and 1.0 indicate a strong positive relationship.
The measurement can be significant or insignificant and in this place the statistics helps to solve this
problem. The notation of symbols “*” and “**” will be used to show the significance (it shows how
much the measurement is reliable).
* – let the readers be 95% sure that the measurement is not an error (for example, significant*).
** – let the readers be 99% sure that the measurement is not an error (for example, significant**).
The findings will be explained in the predefined order in order to have a clear vision on the analysis
methodology. Firstly, the variables and analysis strategy is explained. Secondly, the findings are
presented according the presented analysis strategy. The first two steps are repeated for every
37
research question. After that the specific analysis of a case will be done using the same analysis
concept. Finally, the mutually derived conclusions will be placed.
4.2 The relation between internal integration and the performance of a company
To answer the first and at the same time the main research question the CHIR1, SRI, SPI, LRI, LPI
variables are used. To measure the relation between variables the correlation coefficient
(Spearman’s rho) is used. The strategy of the analysis can be divided in three stages. The relations
(R1, R2, R3, and R4) between the CHIR1 and the PPIs are checked in the first stage by evaluating
each relation in the real world context. Comparative (C1, C2, C3) analysis of the relations between
variables is done in the second stage. Finally, the main findings are analyzed considering the
reviewed theories that can be compared. The presented strategy is illustrated in Figure 4 (see below)
in order to give clear understanding of how this analysis is done. The explanations of abbreviations
have been done in order to clarify the analysis strategy:
R1 – is the relation of internal integration and perceived short term revenue.
R2 – is the relation of internal integration and perceived short term profit.
R3 – is the relation of internal integration and perceived long term revenue.
R4 – is the relation of internal integration and perceived long term profit.
C1 – is the comparison of the relations R1 and R3. Simply, this comparison explores the internal
integration importance in different time periods in the perceived revenue perspective.
C2 – is the comparison of the relations R3 and R4. Simply, this comparison explores the internal
integration importance against a different perceived performance measurement in long term.
C3 – is the comparison of the relations R2 and R4. Simply, this comparison explores the internal
integrations importance different profitability in different time length periods.
Figure 4 Analysis strategy used to answer the first research question.
38
The CHIR1 is used to measure an overall internal integration. This variable is used instead
of the CHI that includes all the internal integration questions or instead of the CHIR that includes
five questions (see Appendix 1 Table 1). The justification for choosing the CHIR1 is that this index
covers all the questions that shows at least one significant* relation. The CHRI1 does not include
two questions that are not related significantly according to the statistical tests. The reason why
these questions are not significantly related with the PPI might be that people (the survey
respondents) could not understand the questions well. The statement “Always deal with real issues”
might have been too abstract and the question “Do not experience that people pursue their own
private agendas ‘behind the scene’” might have been misleading or the translation into the
Lithuanian language could have misrepresent the real meaning. However, eleven questions show at
least one significant relation with one of the PPI. The CHIR shows relatively stronger relations than
CHIR1 but includes only five questions. The use of the CHIR would distort the internal integration
measurement tool by choosing only the most suitable questions. Finally, by bearing in mind all the
arguments, it was decided to use the CHIR1 as the measurement of internal integration. And since
now the CHRI1 will be treated as internal integration.
The first PPI that was analyzed was the SRI that is used to measure perceived short-term
revenues. To understand why this relation is important we need to understand what revenues mean
in the context of a company. Revenue in short-term is mostly influenced by employees that generate
sales. Usually they are called sales people. If pushed strongly, there they can increase the sales in
short term significantly by not paying attention to efficiency. Such situation would result in the
increase of sales and in most cases decrease of profitability. However, the assumption is that to have
good revenues in shorts term, internal integration is also important, taking into consideration that to
achieve good sales results the support from other people within the company is needed.
The findings in Figure 5 show that there is a relation between perceived short-term
revenues and internal integration. The results are not obvious because companies are very spread
around the average. However, the tendency that is expressed by the curve is seen clearly, too. The
SRI is related significantly** with internal integration; in other words, there is enough evidence that
the relationship is important in the Lithuanian context. It has been mentioned that the CHIR1 values
are widely spread around the mean. Such situation can be interpreted in the way that the chart has
specific groups of companies that behave differently from the majority. These groups are put into
clusters A, B, C and D (see Figure 5). The clusters are marked approximately in order to clarify the
findings in a concise way. The “A” area covers the cluster of quite well internally integrated
companies but have problems with the effectiveness in short term. These companies might have
experienced short-term problems in generating revenue or they used acted internal integration. The
39
“B” area consists of companies that are internally integrated and generated revenues well in last
financial period. These companies can be described in short as the “best place to work companies”.
The “C” area covers the cluster of companies that experience internal disintegration and generated
poor revenue flows. In short, these companies are to go bankrupt or fundamental changes have to be
done in order to refresh them. The “D” area includes the companies that are internally integrated
less than average, but generate revenues very well in the short term. This cluster can be mostly
influenced by the sales persons, by fostering revenues only in short term in order to show-off.
Show-offs can be mostly treated as disintegration practice. All four areas can be considered as
exploratory findings and can have significant value in explaining the behavior of companies in
Lithuania (for more detailed visualization see Appendix 2 Figure 1). The main finding is considered
to be the relation between the CHIR1 and the SRI.
Figure 5 Relation between internal integration and perceived revenue in short term.
The second relation where the internal integration is analyzed is the SPI that is used to
measure perceived short-term profitability. Profitability can be explained with a similar example
except that now the main role for generating profitability lies within the accounting department,
which mostly focuses on numbers. They have to assure that the actions done by their sales people
will condition decent profitability. Profit is a much desired outcome of revenues but sometimes the
sales people needs to capture new markets or launch new products in order to satisfy the new
demand. And in such case accountants might slow down the fast changes because that might impact
short-term profitability significantly. Two different groups are responsible for generating profits but
mostly accountants are responsible for the efficiency in a short-term period. That is the reason why
internal integration is assumed to be even more important in coordinating operations to be profitable
in the short term.
40
The findings are similar (see Figure 5 and Figure 6) to the perceived short-term revenue
findings. The results shows that internal integration has a relation with the perceived short-term
profits. That means that there is not enought evidence to conclude that the relation is not important
in the context of Lithuania. Considering that the relation is important, it makes sense to describe
outlying companies. There is a significant (not in the first and third interquartile range) number of
companies that are relatively deviated from the average. In this case there are the same four
outlying areas (see Apendix 1 Figure 2) that can be clustered into approximately four groups (A, B,
C and D) in Figure 6. The “A” area covers the cluster of quite well internally integrated companies
but they have problems with efficiency. These companies might have experienced short-term
problems in generating profit or these companies used acted internal integration. The “B” area
consists of the companies that are internally integrated and had been perceived as profitable in last
financial period. These companies can be described as leaders in the short term. The “C” area
covers the cluster of companies that experience internal disintegration and showed relatively bad
results. In short, these companies are to go bankrupt or fundamental changes have to be done in
order to refresh them. The “D” area includes the companies that are integrated less than average, but
generate revenues very well in the short term. In this case, this cluster can be mostly influenced by
accountants and by optimizing short-term operations in order to predict good results in a short-term
period. All four areas can be considered as exploratory findings and can have significant value in
explaining the behavior of companies in Lithuania (for justification and more detailed visualization
see Appendix 2 Figure 2). The main finding is considered to be the relation between the CHIR1 and
the SPI.
Figure 6 Relation between internal integration and perceived profit in short term.
Going further with the PPIs, it is necessary to talk about the LRI. The perceived long-term
revenues have moderate** (see Appendix 1 table 3) relation with the SRI and SPI. That means that
41
long term revenues depend on short term performance results. However, to generate long-term
revenues companies must have the right long term plan of how to be effective in a long-term period.
By the meaning of effectiveness companies must know how to keep revenues at a necessary level.
In the long-term revenue case we most often talk about the creativity of a company and its ability to
foster innovations. The fact that the economic situation is constantly changing leads companies to
search for the practices that can help foster innovations. That is why it is assumed that integration is
essential in order to keep effectiveness in long term and in high level.
Figure 7 shows the relation between long-term revenues and internal integration. The
results are not obvious because the companies are deviated around the average. The results are very
similar to the last two examples. This means that by increasing internal integration companies can
improve revenues and the relation is week and significant** in the long term. In addition to the LRI
relation it can be mentioned that the curve in Figure 7 is relatively steeper than the curves in Figure
5 and Figure 6. This finding strongly contributes to what will be discussed in the next stage of the
analysis. The results are quite similar but the interpretations are different because of the specificity
of indicators. In Figure 7 the “A” area covers the cluster of quite well internally integrated
companies but have problems with the effectiveness in long term. These companies might have
been experiencing long-term problems in the perspective of revenue or the companies had been
“acting” internal integration in long term. The “B” area consists of the companies that are internally
integrated and had been perceived as profitable in the last three-year period. This outcome is desired
by many companies in the perspective of revenues. Such companies are thought to be good
employers because they can offer good environment for their employees and at the same time are
committed to paying a decent salary. These companies can be described as one of the leaders in the
job market. The “C” area covers the cluster of companies that experience internal disintegration and
showed bad results in revenues. In short, these companies are to go bankrupt or fundamental
changes have to be done in order to refresh them. The results in Figure 7 of the “C” cluster does not
change from the results in previous cases (see Figure 5 and Figure 6) except that in this case the
results are relatively more important because long-term performance problems have to be treated
much more seriously. The “D” area includes companies that are integrated less than average, but
generate revenues very well in the long term.
To foster innovation a company has to be well integrated internally as Hislop (2003) and
Koch (2011) emphasize on innovation integration. It would be difficult to conclude that internal
integration is not important for generating revenues. This finding in the “D” area can strongly
contribute to the assumption that the companies are in this area not because of company’s ability to
innovate. The companies have the undetermined methods of how to generate revenue in long term
being relatively disintegrated. From the perspective of employees this can be considered as a
42
difficult place to work but rewords can be decent assuming that company is able to pay because of
good financial results. All four areas can be considered as exploratory findings and can have
significant value in explaining the behavior of companies in Lithuania (for more detailed
visualization see Appendix 2 Figure 3). The main finding in this case is considered to be relation
between the CHIR1 and the LRI.
Figure 7 Relation between internal integration and perceived revenue in long term.
The last and the most desired indicator is the LPI that measures the long-term profitability of a
company. In order to keep long-term profitability, other three indicators have to show good results
(see Appendix 1 Table 3). The most important indicators for keeping the LPI in high level are the
LRI and the SPI. The companies need to have the people who can make sales, to be efficient and
generate desired profits as well as the people who can think creatively in order to keep revenues in
high level and finally they need to have the people that can manage them all in order to keep
profitability in high level in long term.
The curve in Figure 8 shows the relation of internal integration and perceived long-term
profitability. The results are similar to the previous results (see Figure 7, Figure 6 and Figure 5)
except that in this case it is seen that the curve is the steepest. This finding strongly contributes to
what will be discussed in the next stage of the analysis. The “A”, “B” and “C” areas can be
interpreted in a similar way to the previous cases. The “D” area is the most important to this
research because it contradicts the main findings. Companies are able to be profitable in long term
at the same time of being relatively internally disintegrated. However, the main findings would be
that the CHIR1 has a weak relation** with the LPI and this relation is relatively strongest compared
to other three indicators.
43
Figure 8 Relation between internal integration and perceived revenue in long term.
Finally, it can be concluded that weak but significant** relations have been found between
internal integration and the PPIs (for statistical measurements see Appendix 1 Table 2). The
findings show that some relations are relatively stronger. In order to have the perception of how
much they vary a comparison between average curves has to be done. According to the analysis
strategy it has become necessary to talk about the comparison of perceived revenues. Both
indicators (the SRI and the LRI) have been discussed in the dimensions of effectiveness and
efficiency. The outcome is that these two indicators have to be pursued by different groups of
employees in the organization. Both have the same target, i.e. to increase revenues or profit, but the
scope of time periods is different.
Figure 5 and Figure 7 show the behaviors of relations between internal integration and
perceived revenues. In comparison both curves give similar results but when both curves are on one
chart, an obvious difference can be observed. To represent the differences a stepped chart is used.
Each step up means that a company improves perceived performance in the perspective of the
revenue. To do the step, a company needs to reach internal integration at a needed level. The
findings show that internal integration is relatively more important for a long term performance
results of a company. In this case perceived revenues are used as performance indicators. The
contradicting finding is conditioned by the companies that have been relatively less internally
integrated in long term than in short term at grade 2 (see Figure 9 Grade 2 on the axis X). However,
the difference is relatively small compared to other grades. It may be concluded that internal
integration is relatively more important in the long term, specifically for perceived revenues in this
case.
44
Figure 9 Comparison (C1) of relations R1 and R3. For more visualized explanation of relations see Figure 4
Figure 7 and Figure 8 show the behaviors of relations between internal integration and
perceived long term indicators. In comparison, both curves give similar results but when both
curves are on one chart an obvious difference can be observed. To represent the differences stepped
chart is used in the same way as it was used in the last example. The findings show that internal
integration is relatively more important for companies that want to keep long-term profitability at a
desired level. The contradicting findings are conditioned by the companies that have been relatively
less internally integrated in profits than in revenues (Figure 10 Grade 2 on the axis X). That might
be the impact of very competitive period over the last three years in Lithuania because the economic
recession in most cases forced companies to shrink profitability and they have to focus more on
revenue generation in order to survive the crisis. However, the difference is relatively small
comparing to other grades. It may be concluded that internal integration is relatively more important
in the long term, specifically for perceived revenues in this case.
45
Figure 10 Comparison (C2) of relations R3 and R4. For more visualized explanation of relations see figure 4.
The last but no less important comparison (C3) is between the relations R2 and R4 (see
Figure 4). Profitability in long term and in short term has been compared and this comparison is
done in the same way as in the two previous cases. What can be observed in Figure 11 is the
comparative steps. The results are interesting in that well performing companies have to be tangibly
better internally integrated in order to reach excellent profitability in long term (see Figure 11 Grade
4 on X axis). However, the companies that where close to the targets of even reached desired
profitability have to be internally integrated relatively better in short term. The finding can be
concluded in the way that internal integration is significantly much more important for companies
that show excellent profitability in the long term than for companies that show excellent
profitability results in short term.
Figure 11 Comparison (C3) of the relations R2 and R4. For more visualized explanation of relations see Figure 4.
46
All the findings can be summarized in two groups. The first group should include
significant** findings. The second group should include exploratory findings that are not
statistically supported but have enough argumentation in the context of the literature review. All
these findings are thought to be applicable in the scope of Lithuania. These finding will be
numbered for referencing purposes.
The statistically significant findings are:
1) Internal integration is related significantly** with the perceived short term revenues.
The relation is weak.
2) Internal integration is related significantly** with the perceived short term profits. The
relation is weak.
3) Internal integration is related significantly** with the perceived long term revenues.
The relation is weak.
4) Internal integration is related significantly** with the perceived long term profits. The
relation is weak.
5) Internal integration is relatively more important for the perceived long term revenue
than the perceived short term revenue. Both relations are statistically significant**.
6) Internal integration is relatively more important for the perceived long term
profitability than for the perceived long term revenue. Both relations are statistically
significant**.
7) Internal integration is tangibly more important for the companies with excellent
profitability that are seeking long-term excellent profitability.
The exploratory findings are as follows:
8) The Clusters “A”, “B”, “C” and “D” have been assumed to be useful for the
understanding of why some companies are tangibly deviated from the average. The
“A” cluster can be summarized as mismanaged companies whereas the “B” cluster can
be summarized as “the best place to work in” companies. The “C” cluster can be
summarized as the cluster of “unloved children of Lithuania”, which behave bad in
both perspectives and finally can be treated as “the worst place to work for people” and
the “D” cluster can be summarized as the “black sheep” because it is assumed that such
situation under normal conditions should not happen. The argumentation is mostly
based on the relation discovered.
9) The SRI is mostly influenced by the sales department.
10) The SPI is mostly influenced by the accounting department.
11) The LRI can be mostly influenced by the innovative people.
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12) The LPI is mostly influenced by the integrator because in order to show good results of
this indicator, the other three have to be managed correctly.
Figure 12 Company classification based on the analysis of the relations R1, R2, R3 and R4.
The findings that were discovered can be enlightened by some theories. Two comparisons
between the findings and the revised literature have to be done. First, the concept of the PAEI
framework can be used for comparison. Figure 13 represents the suggested concept of comparison.
Second, the corporate lifecycles theory can be used to explain the explored concept in the Figure 12.
To summarize, all the analysis of the main research question, i.e. the internal integration, is
significantly** important for the overall results of the performance of a company. The exploratory
findings contribute to the finding at the extent of evaluating significantly deviated from the
tendencies that have been discovered. And more deep analysis in the perspective of literature
reviewed will be discussed in the next section
48
Figure 13 Company classification based on the indicators (SRI, SPI, LRI, LPI).
4.3 The relation between internal integration and the ability to keep competition in high level
in a changing economic environment
The long-term perceived performance indicators measure the perceived profitability and perceived
revenues in the last three years. The last three year was one of the most difficult periods for
Lithuanian companies because of the after-effect of the global economic crisis. During this period
the competition among companies was very high with many people having lost their jobs.
Companies in Lithuania experienced very tough competition. By carrying out this research it has
been determined that the competitive capabilities were one of the performance measurements of a
company. This is how question (4.4) has raised. To answer this question the CHIR1 and the CR
variables have been used. The CHIR1 variable has been comprehensively introduced. The CR
measures the ability of a company to stay competitive in a changing environment. 244 respondents
answered the open question. That means that the variable has a relatively lower reliability in the
context of Lithuania (the confidence interval is 6.3% in comparison to 5% of the main research
question). Further in the analysis the term competitive retention (CR) will be used. The CR is
related with the internal integration questions (questions that constitute the indicator CHIR1)
significantly* and very significantly**. It can be concluded that an in-depth analysis of the relation
has been carried out.
In Figure 14 the moderate** (see Appendix 1 Table 4) relation between the internal
integration and the competitive retention is presented. In short, the graph shows how internal
integration is related with the ability of a company to stay competitive under a changing economic
environment. The linear tendency can be seen, however, at the value “1” of competitive retention
49
conditions in the results that contradict the findings of linearity. The CR, as it has been described in
the introduction, is expert evaluation of the open question. In the condition of possible human errors
the specific values have to be checked that represents grading “1” of the variable CR. In addition,
quite a small amount of values are on the grade “1”. What is more important to mention is that the
experts have reported problems when they needed to decide how to evaluate the case when the
value is between 1 and 2.
Figure 14 Relation between the internal integration and the competitive retention.
After review the four questions have been evaluated differently. The answers (“heavily”,
“difficult to compete because the job market lacks qualified people needed for companies
operations”) have been graded at value “2”. Overall four evaluations have been changed from 1 to
2. After the verification relations between the internal integration and the competitive retention it
visually becomes more linear (see Figure 15). However, the strength and the significance of the
relation remains the same. In the forthcoming analysis the fixed CR has been used. The
abbreviation remains the same because statistically no changes have been done in the perspective of
significance and strength.
50
Figure 15 Relation between internal integration and competitive retention after verification.
A conclusion may be presented here. The finding is significant but the generalization is
relatively less reliable than that of the main question. Some data fixes have been done. Such
interruption might be treated as a biased action in order to represent the results the author wants.
However, the findings show that the relation between internal integration and the competitive
retention is moderate and significant**. The evaluation of applicability of this relation is left for the
reader to determine.
4.4 What is the required level of internal integration?
The questionnaire did not have a question of how to measure the required internal integration level
as considerable ground for the construction of such question was not found. However, a similar
question has been discovered in literature and the same question has been raised at the beginning of
the study. To answer this question, the findings that have been derived from the previous findings
have been used.
The relations between the CHIR1 and the LPI, the SPI and the CR are used for explaining
the current question. The LPI and the SPI are used because they are assumed to be the most
significant in short and long term. The CHIR1 is used as the indicator of internal integration in the
same way as in previous comparisons. The CR is used because current findings show relation
between the CR and the CHIR1 that is moderate strength and significant**. In addition to that, it
might be assumed that this indicator was one of the most important in the previous three years
because of tough uncertain situation in the market. The use of the CR is quite complicated and has
to be discussed more deeply. Firstly, the CR had problems with grades “1” and “2” and secondly,
the CR has different scales than the LPI or the SPI. Therefore, to compare all three variables in one
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graph would be complicated. As a result, the CR, has been rescaled. The values “1” and “2” have
been recoded to “1”, value “3” recoded to “2”, value “4” recoded to “3” and value “5” recoded to
“4”. The grade “very uncompetitive” has been recoded to “uncompetitive”. The rescaled CR
variable has the abbreviation CR1. New variable CR1 enabled to place all three relations on a single
stepped graph (see Figure 16).
Figure 16 Comparison of the LPI, the SPI, the CR1 relations with the CHIR1.
Grades “3” and “4” match the “reached the goals” and “exceeded goals” in the perspective
of the LPI and the SPI. Respectively, from the perspective of the CR, these values mean that a
company is “competitive” or “very competitive” in a changing economic situation. These values
indicate the companies of good performance, in most cases these grades could be treated as markers
for companies from the perspective of performance indicators. Argumentation is assumed to be
relatively important to identify companies from the perspective of performance indicators.
Essentially, well performing companies have to keep internal integration relatively high. According
to the findings, all perceived performance indicators are related with internal integration. The
relation is very significant** according to the statistical tests. The implication conditioned by these
findings would be that companies have to be somewhere about value “43” of the CHIR1
measurement (see Figure 16). Simply talking, almost all the internal integration questions in the
questionnaire have to be answer higher than the average.
The finding can be treated as not very reliable because there are relatively many companies
with low integration and good performance results. Argumentation for this contradiction can be
found in the analysis of the first research questions were the clusters of “mismanaged”, “best place 52
to work”, “the worst place to work” and “black sheep” companies were explored. The “black
sheep” are the most contradicting. In Figures 5, 6, 7 and 8 it can be noticed that there are not too
many companies with excellent grades and very low integration level. These companies can be
treated as outliers. Outliers can mean that these companies behave not as they should. Summarizing
all pros and cons, it would be very difficult to conclude that the integration level should be much
lower. In addition, the question has practical background and that is the reason why in this case the
marker of value 43 of compounded 11 internal integration questions can be treated as the required
level of integration.
4.5 How is internal integration perceived between the people in different positions within a
company?
This question is very import for two very interrelated reasons. Firstly, it is important to determine
how differently internal integration is perceived on different employee levels. Secondly, the relation
between the variables (the CHIR1 and the PPIs) is very important for assessing the reliability of the
research tool. To answer the question the results from a specific company that contributed with
significant* sample (at confidence level of 6.33%) is used. 103 respondents took part in the research
from the specific company. An anonymous name “Tanna” will be used to reference this company.
Tanna is one of the construction companies with about 180 employees. The company responded to
official invitation to take part in the survey as the whole company. Tanna’s contribution has been
very significant, because the findings related with this case strongly contribute to the reliability of
the main survey at the scope of Lithuania.
To answer this (4.5) question the variables CHIR1, SPI, SRI, LPI, LRI, CRI and the
“Position in the company” were used. Most of the variables are known quite well, therefore, only
the last one has to be explained more. The “position in the company” is a measurement from 1 to 5.
It refers to the hierarchical structure in the company, thus, the higher the value, the higher the
position in the company hierarchy. The position values can be seen in the Figure 17 (see below).
The analysis strategy constitutes two stages. First, the linearity between the CHIR1 and the
“Position in the company” will be analyzed. Second, the relations (R1, R2, R3 and R4) will be
investigated in groups. And finally, the relation between the CR and the CHIR1 will be researched
in groups. The relations in groups are considered as a subordinate effect.
Linear relation is not welcome because that would mean that different employee level
understand questions differently or perceive internal integration differently. In Figure 17 it can be
seen that the linear relationship has not been identified. Statistical tests contribute to the same
outcome that there is no relation between the CHIR1 and the “Position in the company” (see
Appendix 1 Table 5). The results, therefore, contribute to the reliability of the research tool.
53
However, senior specialists feel more internally integrated than others. All senior officers evaluated
Tanna higher than 33 on the scale of the CHIR1. One junior employee feels much disintegrated, but
this single case can be treated as an outlier. Junior employees usually are working not a long time
and their perception can be relatively misrepresentative. Finally, no relation between the position in
the company and internal integration has been identified (for statistical test significance see
Appendix 1 Table 5).
Figure 17 Relation between the CHIR1 and the “Position in the company”.
The CHIR1 does not include two questions and one of them is “Always deal with real
issues“. The relation has been found between a problematic question and both perceived revenue
indicators (see Appendix 1 Table 7). The relation is not expected in such case because the survey
has been carried out in a specific company and the profitability should be constant or have a
tendency to be constant. In addition to this, the relation is statistically significant*. To summarize,
this finding supports the decision not to compound the question “Always deal with real issues” into
the sum of the CHIR1 variable.
Going further, the relation between the CHIR1 and the PPIs is checked. These relations
should not be present in this case. The relation between the CHIR1 and the CR will not be analyzed
because only 51 respondents answer the question and the sample is too small to have representative
results. As it has been mentioned above, the survey has been carried out in the specific company
and the profitability or revenues should be constant or have a tendency to be constant. Once more
the linearity check has to be done but in this case the linearity has to be checked for every group in
order to be sure that the questionnaire can be applied for every employee position. No linearity
tendency can be identified except the SPI relation with the CHIR1 (see Figure 18). However, a
statistical test does not show any significant correlation. That means that no linearity has been
identified. By this finding it can be concluded that all positions in the company Tanna have been
able to answer the questions unbiased. “Unbiased” means that people were not expected to be
54
evaluating internal integration of the performance results of the company. In addition to that, it can
be concluded that this finding strongly contributes to the reliability of the research tool in the main
survey.
Figure 18 Relations between the CHIR1 and the SPI, the SRI, the LPI and the LRI
The findings of this research question can mostly be treated as the verification of the
reliability of questionnaires. Firstly, it has been verified that the position in the company is not
associated with the ability to evaluate the internal integration of the company. Secondly, it has been
verified that the internal integration evaluation has been unbiased, which strongly corresponds to
the reliability of the relations R1, R2, R3 and R4 in Figure 4. The conclusion would be that the case
analysis strongly supports the reliability of the main research tool and verifies that the tool can be
used for measuring sample with respondents of different positions in the companies they work for.
4.7 Conclusion of findings
The research can be treated as successful. The findings that have been identified can be treated as
important and applicable in the scope of Lithuania. All these strongly contributed to the research
questions and the overall understanding of the significance of internal integration for the
55
performance results of a company. To have a clear vision on what have been found, some most
important findings will be summarized.
How is internal integration related with the performance of a company?
The relation between internal integration and perceived performance indicators has been identified.
The relation can be interpreted as weak but very significant. The exploratory findings gave
understanding of the classification of integration of Lithuanian companies in the perspectives of
perceived performance indicators. Companies have been classified into four clusters: mismanaged,
best place to work, worst place to work and black sheep. Exploratory findings of PAEI framework
has been introduced for understanding every single relation between internal integration and
perceived performance indicators.
How is integration perceived between different positions in the company?
The Tanna sample shows that there is no relation between the positions and internal integration
evaluations. These findings are of secondary importance, but strongly contribute to the reliability of
the research tool because of the findings that employees can identify the internal integration of a
company unbiased. The case analysis has shown that the questionnaire is reliable enough to assess
the internal integration of a company when the population is constructed of the respondents that
work in different positions.
How is internal integration related with the ability to keep competition in high level within
a changing economic environment?
Internal integration is related with the ability of a company to stay competitive in a changing
economic environment. The relation is moderate and statistically very significant**. The error of
the applicability of findings to the country level is about 6.3 percent. By comparison, the main
research has 5% error of applicability to the whole of Lithuania, which is acceptable in scientific
studies. This finding might not be accepted by scientists, but for practitioners it might give some
useful implications.
What is the required level of internal integration?
The answer to this question can be treated as biased because no statistical tests can support the
finding. However, the findings to this question can be treated as important in terms of exploratory
findings for future research. A company’s internal integration has to score 43 if measured by
CHIR1.
All the findings contribute to a single goal, i.e. to explain the importance of internal
integration to the performance of companies. It has been scientifically confirmed that internal
integration is related significantly** with the performance of companies. That gives enough support
for the exploratory results that the results could be used in practice. For this purpose four clusters
have been derived in order for companies to identify how good they are. Finally, the reliability has
56
been checked with the Tanna case. In conclusion, all the findings are important and have to be
discussed in the perspective of literature reviewed.
5 DISCUSSION
5.1 Introduction
According to Rudestam and Newton (2001), a good discussion chapter typically covers a
consideration of findings under existing research studies, implications for current theory, careful
examination of findings that have week support, validity and generalizability issues, implications
for further research and finally implications for professional practice. All these aspects have been
addressed in this research.
5.2 A consideration of the findings
The research started by having one assumption that internal integration is much more important
than it is perceived in the real world. Most theoretical sources present internal integration as
important in some business practices. However, internal integration has not been researched
comprehensively by exploring the relation with performance indicators and only a few studies
considered that the relation between internal integration and a company’s performance is important.
The main focus in the reviewed literature has been on the relation of internal integration with
external integration. In addition, most researchers had used a case study research design or had
carried out analyses in specific business sector. Therefore, the gap in literature has been identified,
especially considering the context of Lithuania. The Adizes (1992) approach has been used in
understanding internal integration because his companies success formula have direct impact on the
performance of companies. The mutual trust and respect theory has been considered as a reliable
methodology to measure internal integration. The findings cover the identified gap and the research
results can be treated as significant** in the scope of Lithuania.
Four perceived performance indicators have shown a relation with internal integration.
Some scholars might consider that this relation can be influenced by external forces but the counter
argument for such statement is that various sources consider internal integration as very important
for integrating externally. Literature shows that the direction of the relation is from internal
integration to external integration and not vice versa. Therefore, internal integration can be treated
as essentially important to achieve any externally oriented tasks and very important in achieving
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good performance results. The last statement can be supported by the finding that the CHIR1 is
related with every PPI significantly**.
Going further, the Adizes methodology suggested the PAEI framework as a tool for the
classification of management styles. The PAEI framework classifies managerial styles into the
dimensions of time scope (short-term or long-term) and performance orientation (efficiency or
effectiveness). Short-term revenues have been matched with the effectiveness in the short term and
the best role that can manage such task is called the “Producer” (the “P” type). The “Administrator”
(the “A” type) can handle the tasks of managing efficiently in the short term. The “Entrepreneur”
(the “E” type) can manage long-term revenue generation by being able to effectively manage in a
long-term perspective. All these types have to be integrated by the “Integrator” (the “I” type”) in
order to generate the most desired outcome, i.e. long-term profits. Long-term profits depend on both
short-term performances and long-term revenues and the same is with the “I” type, which has to
manage all the other types. Such alignment of the PAEI theory with perceived performance
indicators has exploratory background. These findings have value for practitioners and that is why
this aspect will be introduced more deeply.
Figure 19 Integrated corporate lifecycles model into the PAEI framework.
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Corporate lifecycles is another theory introduced by Adizes (2004b). This theory can be
aligned with clusters (“A”, “B”, “C” and “D”) identified in exploring the relations R1, R2, R3 and
R4 (see Figure 4). For the comparison of corporate lifecycle theory, a graph (see Figure 19) has
been created. The “Courtship” stage has not been discussed because every company in the list is
“alive”. The other nine stages (from “Infancy” to “Death”) can be mapped from the corporate
lifecycle model to the introduced model in Figure 19. Every orange star in the graph indicates a
company’s stage in the corporate lifecycle model (see Figure 3). The “Infancy” is the stage when a
company is action-oriented and opportunity-oriented. Action mostly corresponds with the
producer’s abilities to generate revenue. Opportunities correspond to the creative side of founders.
At this stage a company is mostly very well integrated but can experience problems with the
effectiveness and efficiency because they need to learn everything. This stage can be identified in
Figure 19 graphs “P” and “E” in the “A” clusters.
If a company succeeds to cope with problems in its infancy stage, it can reach the “go-go”
stage. In this stage sales are growing significantly. The “go-go stage can be identified in Figure 19
graphs “P”, and “E” in the “B” clusters. Such companies become sales-driven and if everything is
all right, they reach the adolescence stage. “Adolescence” can be described as the times of
uncertainty; a company experiences the changes that are needed for further growth. In this stages
companies start investing their information systems and professional management takes control.
Changes require some investment and that means that a company can lose profitability. By having
new management a company can lose some internal integration. New systems usually can cause
some internal disintegration, too. Such behavior can be seen in Figure 19 graphs “A” and “I’ in the
“A” cluster.
If a company survives the adolescence, it goes to its prime stage, which is the stage when a
company is in balance between control and flexibility. A company becomes cash-rich. The biggest
problem in this stage is that a company is in its “prime stage” because the company management
loses its wakefulness. Such behavior can be identified in Figure 19 graphs “A” and “I” in the “B”
cluster.
The next stage in the Adizes corporate lifecycle is the “stable stage”. In this stage a
company is quite healthy and cash-rich. Some inflexibility is mostly experienced because of the
“snoozing” management. This state can be identified by curves in Figure 19. The right side of every
curve in every graph corresponds to an unmapped star that is at the top of the hill (imagine Figure
19 transformed to the left).
When a company is in this stage, it is a question of time when it will go to the next stage,
the “Aristocracy”. The stage when a company is cash-rich starts to care for people and starts losing
some entrepreneurship style and becomes the financial statement-driven. That is why a company
59
loses some internal integration. This style can be identified in Figure 19 graphs “A” and “I” in the
“D” cluster. Going further, the time comes for the stage of “Early Bureaucracy”. This stage is
identified as a “witch hunting” period. A company still generates revenue, but loses efficiency
because of its lost internal integration (see Figure 19 graphs “I” and “A” in the “C” cluster). This
period is the indicator that a company is in the direction towards the stages “Bureaucracy” and
“Death”.
When a company is not able to generate enough sales in order to survive, it can be treated
that a company is in the stage of “Bureaucracy” integration (see Figure 19 graphs “P” and “E” in
the “D” cluster). Such company needs financial injection in order to be reborn. The “Death” stage is
when a company is alive because of artificial (financial injections usually done by a government)
support integration (see Figure 19 graphs “P” and “I” in the “C” cluster).
Finally, it can be concluded that the curves presented in the graphs of Figure 19 have
similarities with the corporate lifecycles (see Figure 3) and can be compared to some extent. The
identified clusters have been classified (see Figure 12) into four categories. Looking from the
perspective of this classification no large contradictions have been identified. The comparison
would expand the scope enormously; therefore, the comparison of this finding in the context of the
integrated corporate lifecycle model (see Figure 19) is left for the reader.
Competitive retention is a newly created term in this thesis. This term refers to the ability
of a company to stay competitive in a changing economic environment. In theory not much has
been talked about such expression. Mostly this indicator has risen out of the recent situation in the
economy. In literature competitiveness has been mostly treated as an indicator of external
integration. External integration has not been the research object that is why competitive retention
has been treated as a performance indicator. Not surprisingly, a competitive retention indicator
demonstrated very similar behavior like perceived performance indicators.
In this place I think it can be concluded that the main findings can be strongly supported by
at least two theoretical frameworks. These frameworks can be used for corporate strategy creation
in order to have a strategy that could assure a healthy state of the internal integration of companies.
In literature there no contradicting implications against the findings of this research have been
found. In contrast, many researchers have identified a gap that has been covered by this research to
some extent.
5.3 Implications for current theory.
Some implications for improving the Adizes frameworks can be done. Figure 19 has two curves, the
“red” and the “green” cycles. These curves can be interpreted in the way that different businesses
have different lifecycles because of the specifics of a particular business sector. For example, an
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online shop can reach its “prime” in one year and in contrast, a new insurance company can reach
its prime stage in five years. Therefore, these graphs can even give more space for interpretations
and understanding of corporate cycles by adding time dimension for the Adizes (2004b) corporate
lifecycle model. The same Figure 19 has a classification graph according to the PAEI framework.
Figure 19 can be used as a tool for understanding why some specific company experiences
problems. Talking exactly, what kind of management style a company lacks. The classification of
clusters in four categories (see Figure 12) can be used in addition to the PAEI framework. To
summarize, the Adizes framework, the PAEI and the corporate lifecycles can be integrated by the
concept that is presented in Figure 19. This framework can be called an integrated corporate
lifecycles framework in the scope of this thesis.
5.4 Findings that only partially answered the research questions.
What is the required level of internal integration? Is the research question that was not answered
entirely? To answer this question the findings from the other research questions have been used.
That is why these findings can be treated as exploratory. The value of 43 (if the CHIR1 for
measuring internal integration is used) has been considered as the required level of internal
integration. The question is philosophical to some extent. That is why to define a concrete marker
can be inappropriate. However, there has not been found any other method of how to do that and
that is why the value 43 of the CHIR1 is treated as the required internal integration level.
5.5 Limitations
The research has a few limitations that need to be discussed. Firstly, the untracked responses might
have influenced the impact generalizability results. Secondly, the validity of the tool has been a
discussable object. Both limitations have been comprehensively handled in order to reduce the
possible impact as much as possible.
Respondents cannot be identified at 100% as being the representatives of a specific
company. The respondent is identified as a unique company if the IP address differs and/or the
tracked email address differs. That is why such situations when two or more respondents work in
the same company can occur. This situation has been managed effectively. Fewer than 50
occurrences have been untracked. All the cases that have a distinct combination of the IP address
and email have been treated as companies and an average (the mode and if not applicable median
has been used) values have been used to represent a company. It can be concluded that this
limitation has been handled effectively and has not influenced the reliability of the research tool.
The sample has one discussable area, i.e. the representatives of a company can mislead by
giving not representative results. In this place an assumption has been made that managers can give
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the most representative feedback on the questions in the questionnaire. The case of Tanna strongly
supported the reliability of the research tool by conclusions that respondents can evaluate the
integration level of companies independently from the position. In addition to that, it has been
grounded that the evaluation of perceived indicators does not have an impact on the evaluation of
the internal integration results. To summarize, the research tool is verified and significantly*
reliable.
Finally, both limitations have been comprehensively handled. The results are generalizable
and the research tool is significantly* reliable.
5.6 Implications for further research.
There is much space for further research. Firstly, future researchers can consider carrying out
analyses including the variables that identify the business sector a company is in. The suggested
classifications and the integrated corporate lifecycle framework have to be researched more deeply
in the context of internal integration. These would be the most important areas where scholars of
internal integration should focus on in future research.
The integration level in different business segments could give more information as to why
the relation between internal integration and perceived performance indicators is weak**. This case
is important from the scientific point of view in order to understand internal integration as having
information that the specific sectors have. That is especially important for practitioners in order to
answer the question of what the required level of integration is.
The classification of companies (see Figure 12) and suggested integrated corporate
lifecycles framework (see Figure 19) can be treated as research objects. These implications are
based on exploratory findings and that is the reason why more support is needed from other scholars
in order to verify the slightly modified theories.
Both suggested areas are important and worth exploring more deeply. However, the most
important is the first one because that could give significant insight into how internal integration is
distributed across industries or business areas. Such research could enable to explain more variation
of the relation between internal integration and the performance indicators of companies.
5.7 Implications of the study for professional practice.
How to assess the internal integration strategy in the context of internal integration? This is the
question that can be answered by practitioners. Firstly, companies have to know where they are.
The CHIR1 can be used as a measurement tool of integration and the PPIs can be used for
measuring perceived performance. Secondly, companies have to know where they want to be and if
they have a complementary team in the decision-making process. Finally, companies can assess in
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what corporate lifecycle they are. By knowing all this, strategy development implications can be
constructed.
A very important issue for practitioners is to know where they are. For that purpose a
questionnaire for the current research can be used. This tool can help a company to assess its overall
internal integration level and the perceived performance level. By having summarized company’s
results on proposed methodological framework, a company’s management can align company’s
results with integrated corporate lifecycle model. That can help to decide where they are and where
they want to be. The integrated corporate lifecycle model can help to assess what types of
management they mostly need based on the appearance in the lifecycle. By knowing where they
want to be they can evaluate what problems they will probably encounter and what kind of
management is needed to solve the incurred issues. For the purpose of any change the PAEI
framework is suggested in construction the decision making teams. All these recommendations
form a strategy development framework in the perspective of internal integration.
Internal integration has relation with the performance of a company. These findings have
been confirmed as significant. By keeping this in mind, it can be concluded, that the internal
integration formation strategy has to be one of the main points in the whole picture of corporate
strategy.
5 CONCLUSION
The exploration of literature has identified a gap related with the explorations of internal integration
importance on the performance of a company. Internal integration has not been seriously explored
as a primary goal in the creation of corporate strategy. The focus of literature reviewed is mostly
concentrated on the relation between internal integration and external integration. In such a situation
two aims have been raised. The aims of the research have been two-fold: commercial and scientific.
At the end it can be considered that both aims have been achieved. From the commercial
perspective, a methodology of how to evaluate the internal integration of a company and how to
assess it in the perspective of the perceived company performance has been verified.
From the scientific perspective it has been determined that internal integration is positively
related with perceived performance indicators. The relation is weak but very significant. This is the
answer to the main research question. By exploring more deeply, four clusters of outlying
companies have been identified. The exploratory findings can be useful for the scientific world as
well as for practitioners in order to assess company’s situation in the Lithuanian context. However,
the four clusters have to be tested by other studies because the exploratory findings have been done
as an outcome of the general findings of this study and literature synthesis.
63
The gap that is identified in the findings section is that there are quite many unexplained
variations that need to be explored. The recommendation for further research would be to carry out
a study of the relation between internal integration and company’s performance in different
business sectors. Finally, it can be concluded that the research reached all its objectives. The
recommendations for practitioners have been constructed and the implication that internal
integration has to be addressed as a serious candidate for the construction of a company’s strategy
has been created. Finally, all the findings can be addressed in the scope of Lithuania because the
sample can be treated as reliable in the scientific world.
64
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8. APPENDICES
Appendix 1 - tables
Table 1 Spearman’s correlation matrix shows relation between internal integration questions and perceived performance indicators. **- significant at 0.01 (two tailed), *- significant at 0.05 (two tailed)
No.
Perceived
revenues in short
term
Perceived profit in short
term
Perceived
revenues in 3 year period
Perceived profit
in 3 year period
CRI CHI includes
CHIR includes
CHIR1
1 Accept that everybody are entitled to form their own opinion about matters
,153** ,175** ,182** ,173** ,180** + + +
2 Serve and support each other ,115* ,160** ,160** ,201** .245** + + +
3 Receive and give honest feedback ,149** ,198** ,180** ,177** .290** + + +
4 Learn from colleagues ,140** ,203** ,198** ,201** .128* + + +
5 Share common goals and vision ,207** ,253** ,227** ,267** .257** + + +
6 Can disagree without being disagreeable ,075 ,107* ,082 ,125* .219** + +
7 Give to each other without thinking of getting something in return
,057 ,078 ,100* ,141** .281** + +
8 Do not intimidate other people’s thinking even if they think differently from us
,081 ,095 ,133** ,152** .183** + +
9 Listen to each other to understand each other’s position
,053 ,098* ,037 ,087 .135* + +
10 Create of win-win situation out of most disagreements
,150** ,091 ,154** ,129* .160* + +
11 Spend no time on internal fighting and positioning
,051 ,007 ,131** ,092 .223** + +
12 Always deal with real issues ,000 ,003 -,017 -,016 0.086 +
13 Do not experience that people pursue their own private agendas ‘behind the scene’
,011 -,017 ,035 ,025 0.05 +
Table 2 Spearman’s correlations between variables. **- significant at 0.01 (two tailed), *- significant at 0.05 (two tailed)
CHI CHIR CHR1
Perceived revenues in short term (SRI) ,151** ,192** ,158**
Perceived profit in short term (SPI) ,170** ,254** ,183**
Perceived revenues in 3 year period (LRI) ,211** ,244** ,223**
Perceived profit in 3 year period (LSI) ,215** ,261** ,234**
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Table 3 Correlations of PPIs.
Correlations
SRI SPI LRI LPI
Spearman's rho SRI Correlation Coefficient 1.000 .779** .608** .529**
Sig. (2-tailed) . .000 .000 .000
N 406 397 401 394
SPI Correlation Coefficient .779** 1.000 .546** .631**
Sig. (2-tailed) .000 . .000 .000
N 397 398 393 393
LRI Correlation Coefficient .608** .546** 1.000 .842**
Sig. (2-tailed) .000 .000 . .000
N 401 393 402 393
LPI Correlation Coefficient .529** .631** .842** 1.000
Sig. (2-tailed) .000 .000 .000 .
N 394 393 393 394
**. Correlation is significant at the 0.01 level (2-tailed).
Table 4 Relation between internal integration and competitive retention
Correlations
CR CHIR1
Spearman's rho CR Correlation Coefficient 1.000 .305**
Sig. (2-tailed) . .000
N 244 244
CHIR1 Correlation Coefficient .305** 1.000
Sig. (2-tailed) .000 .
N 244 410
**. Correlation is significant at the 0.01 level (2-tailed).
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Table 5 Association between position in the company and CHIR1
Chi-Square Tests
Value df
Asymp. Sig. (2-
sided)
Pearson Chi-Square 104.970a 120 .834
Likelihood Ratio 99.175 120 .917
Linear-by-Linear Association 3.125 1 .077
N of Valid Cases 103
a. 149 cells (99.3%) have expected count less than 5. The minimum
expected count is .02.
Table 6 Association between position in the company and other variables for Tanna case.
Correlations
CR CHIR1
Perceived revenues in short
term
Perceived profit in short term
Perceived revenues in 3 year period
Perceived profit in 3
year period
Position in the company
Pearson Correlation
.290* .144 .051 .020 .066 .202
Sig. (2-tailed)
.039 .147 .622 .855 .527 .059
N 51 103 95 87 94 88
Table 7 Correlation matrix of case Tanna71
Spearman's correlations Position in the
company
Perceived revenues in short
term
Perceived profit in
short term
Perceived revenues in 3 year period
Perceived profit in 3 year period CR
Int. Create of win-win situation out of most disagreements
Correlation Coefficient .104 .217* -.005 .179 -.054 .287*
Sig. (2-tailed) .296 .034 .965 .084 .620 .041
N 103 95 87 94 88 51
Int. Serve and support each other
Correlation Coefficient .053 .250* .179 .157 .120 -.108
Sig. (2-tailed) .593 .015 .097 .130 .266 .452
N 103 95 87 94 88 51
Int. Always deal with real issues
Correlation Coefficient -.057 .263* .187 .223* .014 -.099
Sig. (2-tailed) .565 .010 .083 .031 .896 .489
N 103 95 87 94 88 51
Position in the company Correlation Coefficient 1.000 .035 .075 .040 .257* .247
Sig. (2-tailed) . .737 .489 .705 .016 .080
N 103 95 87 94 88 51
Perceived revenues in short term
Correlation Coefficient .035 1.000 .545** .584** .357** .291*
Sig. (2-tailed) .737 . .000 .000 .001 .050
N 95 95 86 94 87 46
Perceived profit in short term
Correlation Coefficient .075 .545** 1.000 .343** .752** .111
Sig. (2-tailed) .489 .000 . .001 .000 .490
N 87 86 87 85 86 41
Perceived revenues in 3 year period
Correlation Coefficient .040 .584** .343** 1.000 .529** .285
Sig. (2-tailed) .705 .000 .001 . .000 .055
N 94 94 85 94 86 46
Perceived profit in 3 year period
Correlation Coefficient .257* .357** .752** .529** 1.000 .218
Sig. (2-tailed) .016 .001 .000 .000 . .161
N 88 87 86 86 88 43
CR Correlation Coefficient .247 .291* .111 .285 .218 1.000
Sig. (2-tailed) .080 .050 .490 .055 .161 .
N 51 46 41 46 43 51
Table 8 Correlation matrix of case Tanna
SRI SPI LRI LPI CRCHIR
1SRI Correlation
Coefficient1.000 .545** .584** .357** .291* .154
Sig. (2-tailed) . .000 .000 .001 .050 .137N 95 86 94 87 46 95
SPI Correlation Coefficient
.545** 1.000 .343** .752** .111 .108
Sig. (2-tailed) .000 . .001 .000 .490 .321N 86 87 85 86 41 87
LRI Correlation Coefficient
.584** .343** 1.000 .529** .285 .090
Sig. (2-tailed) .000 .001 . .000 .055 .389N 94 85 94 86 46 94
LPI Correlation Coefficient
.357** .752** .529** 1.000 .218 .030
Sig. (2-tailed) .001 .000 .000 . .161 .784N 87 86 86 88 43 88
CR Correlation Coefficient
.291* .111 .285 .218 1.000 .180
Sig. (2-tailed) .050 .490 .055 .161 . .206N 46 41 46 43 51 51
CHIR1 Correlation Coefficient
.154 .108 .090 .030 .180 1.000
Sig. (2-tailed) .137 .321 .389 .784 .206 .N 95 87 94 88 51 103
72
Appendix 2 - figures
Figure 1 Internal integration and perceived short term revenue relation.
Figure 2 Internal integration and perceived short term profit relation.
73
Figure 3 Internal integration and perceived long term revenue relation.
Figure 4 Internal integration and perceived long term profit relation.
74