Specifying Success Measures within a Performance Domain

By Powell, Judith D.; Bitner, Larry N. | Journal of Business and Entrepreneurship, October 1992 | Go to article overview

Specifying Success Measures within a Performance Domain


Powell, Judith D., Bitner, Larry N., Journal of Business and Entrepreneurship


ABSTRACT

The current body of small business research contains many studies which rely on a quantification of a construct called success. However, no real consensus exists as to how this construct should be measured. This study empirically verifies that the casual interchange of available success measures is inappropriate in much small business research. It is proposed here that appropriate success measures are likely to be research specific. Specifically, measures should be selected only after specifying a success adjudicator and the level within a hierarchial domain of performance.

INTRODUCTION

Achieving and sustaining success is the ultimate goal of any business venture. This goal is reflected in the small business literature which reveals many references to and much discussion of the "successful firm." The focus of empirical as well as conceptual research is on the ability to discern successful from unsuccessful firms. Yet, there is little in the way of a commonly accepted measurement of success. Current theoretical research on success builds on the fifty years of organizational effectiveness literature to specify a firm's success in terms of its effectiveness. Yet, many empirical studies, and especially those dealing with small business research, continue to rely on the underspecified concept of "success" rather than effectiveness.

Research currently continues on "critical success factors," those factors which determine the "successful" firm (Lumpkin & Ireland, 1988). Other research examines specific functional practices of "successful firms" (Montagno, Kuratko & Scarcella, 1986). Yet, rare is the research which clearly specifies what constitutes success. In spite of the wealth of research and discussions on organizational effectiveness, the empirical small business research continues to favor the rather unspecified concept called success. There appears to be no need to reinvent the wheel, or more specifically, recreate a construct within the existing wide body of organizational effectiveness literature. This paper explores the continued use of the concept of "success" in small business research and its place within the domain of organizational effectiveness.

The position taken in this research is that a single operational definition of success is currently untenable. The purpose here is to explore the placement of success within both the construct of organizational effectiveness and the organizational effectiveness literature, and to demonstrate a need for more specificity when using success as a variable. This paper is divided into three major sections. First, a review of the widespread use of the variable success in the small business literature points out the diversity of the measures used. This review becomes the departure point from which a myriad of objectively and subjectively determined success measures are categorized.

Second, results from an empirical study of small retailers are presented. An analysis of the correlation between financial ratios as success measures and subjective measurements of success demonstrates the limited possibilities for casual interchange or substitution of these measures. Finally, with no consensus of measurement and no correlation demonstrated among measures, the third section suggests a means by which the construct known as success may be specified. This refinement in defining success is an initial attempt to bring the construct within the realm of organizational effectiveness theory.

DIVERSITY IN THE MEASUREMENT OF BUSINESS SUCCESS

The more general topic of business performance and its umbrella concept of organizational effectiveness are discussed across a wide spectrum of application in management literature: yet, little operational consensus exists with respect to measurement. Cameron and Whetten (1983) describe the importance of business performance in strategic planning as involving the three dimensions of theory, empirical research, and managerial application. …

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