Academic journal article Journal of Managerial Issues

The Impact of Functional Issue Classification on Managerial Decision Processes: A Study in the Telecommunications Industry

Academic journal article Journal of Managerial Issues

The Impact of Functional Issue Classification on Managerial Decision Processes: A Study in the Telecommunications Industry

Article excerpt

One of the most important responsibilities of organizational managers in turbulent environments is to impose structure and meaning on ambiguous information (Daft and Weick, 1984). Previous research has demonstrated that the classifications which managers utilize to classify issues have a significant impact on a wide range of actions and outcomes (Dutton and Jackson, 1987; Billings and Scherer, 1988; Rajagopalan et al., 1993; Thomas et al., 1993). The most prominent line of this research has focused on the implications of managers classifying issues as either "threats" or "opportunities" (Dutton and Jackson, 1987). However, "threat-opportunity" is not the only classification scheme used by managers. For example, Cowan (1988) found that managers classified problems in terms of their strategic (as opposed to operational) implications.

Another salient classification scheme utilized by managers that has been the focus of previous research involves the functional classification of organizational issues. Dearborn and Simon (1958), Walsh (1988) and Cowan (1990) conducted studies aimed at discovering the functional labels used by managers to classify organizational issues. These studies found that functional classifications (e.g., marketing, financial, human resource) were commonly utilized by managers. These and other studies found that functional labels are a ubiquitous and influential managerial schema. It is also likely that, in the majority of cases, the classification of the issue under review is a tacit assumption among the decision makers. However, prior research on functional classification schema has failed to propose or establish a link between managers' use of these classifications and their patterns of decision-making behavior.

At issue is whether a problem labeled by managers as, for example, a "finance" problem will evoke the same decision-making behavior as, say, an issue labeled as a "human resource" problem. Given that managers may not be "expert" in every functional area, do they nevertheless make decisions across functional fields utilizing similar decision processes? Or, conversely, does the functional classification of issues make a difference in managers' approach to decision-making activities?

The following section provides a brief discussion of the literature relative to the issue classification-decision process linkage. This is followed by propositions specifically focused on how classifying issues as human resource, marketing or financial impacts subsequent decision-making behavior. The methodology and results of an empirical study which tests these propositions is then presented, followed by a discussion which address the implications of these results for both researchers and managers. A brief conclusion then summarizes the overall study.


A number of researchers have presented both theoretical and empirical evidence relative to the impact of issue classifications on decision-making processes (Mittal and Ross, 1998; Ashmos et at., 1998). Three factors -- issue importance, issue complexity, and threat/opportunity--have been shown to have demonstrable effects on managers' decision-making behavior. Overall, this body of research shows that issue classification influences subsequent decision-making processes. However, the impact of a functional classification schema on managers' decision processes has not been theoretically specified or empirically tested.

The functional classifications used in prior research reveal that production, marketing, finance, and human resource represent the most common set of functional classifications used by managers (Dearborn and Simon, 1958; Walsh, 1988; Cowan, 1990; Beyer et at., 1997). One would expect that most general managers will regularly deal with issues from each of these functional domains.

But, do these classifications influence managers' decision processes? In order to investigate the linkages between functional issue classification and managers' decision processes, it is necessary to specify the decision-making process(es) most commonly employed by managers. …

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