Individuals as a Key to better Firm Performance: The Role of Decision-Making Styles of Individual Decision Makers in Organizations
This study aims to investigate the relation between the decision-making styles of individual decision makers and the overall firm performance of organizations. Previous research has theorized that a procedural rational decision-making style has a positive effect on firm performance, whereas a political decision-making style has a negative impact on firm performance. Other scholars have tested this assumption in relation with organizational decision-making styles. However, this study focuses on the decision-making style of individual decision makers. This research is executed on the Dutch water authorities, as the minutes of the meetings of the board of directors are publicly available. Whether an individual executes a procedural rational or a political decision-making style is determined with a content analysis. With this content analysis, it is determined which decision-making style an individual is executing and hence, the majorities are determined. Firm performance is computed by the costs of the water authority divided by the regional inhabitants of that water authority. This study found significant positive effects of a high number of individuals with a procedural rational decision-making style and significant negative effects of a high number of individuals with a political decision-making style on firm performance. In addition, a majority of individuals with a political decision-making style in combination with a high number of individuals with a procedural rational decision-making style has a positive, but non-significant effect on firm performance. In the future, scholars should attempt to further explore the relationship between the decision-making styles of individuals and firm performance, as it is still not totally clear in what context a certain decision-making style has the most positive effect on firm performance.
Faculteit der Managementwetenschappen