ISM UNIVERSITY OF MANAGEMENT AND ECONOMICS MASTER OF SCIENCE IN INTERNATIONAL MARKETING AND MANAGEMENT PROGRAMME

Donatas Eigminas

MASTERS THESIS Internal integration and companys performance

Supervisor Dr. Virginijus Kundrotas, PhD

VILNIUS, 2012

ABSTRACT Eigminas, D. Internal Integration and Companys 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 companys 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 companys 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 companys 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.

SANTRAUKA Eigminas, D. Vidin integracija ir firmos efektyvumas ir naumas [Rankratis]: magistro baigiamasis darbas: vadyba ir verslo administravimas. Vilnius, ISM Vadybos ir ekonomikos universitetas, 2012. Tikslas. Vidin integracija ir mons efektyvumas bei naumas iame darbe pristatyti i bendro pasitikjimo, pagarbos kultros monje bei suvokiamj veiklos efektyvumo ir naumo indikatori perspektyvos. iuo darbu siekta atsakyti klausim, kaip vidin integracija yra susijusi su mons efektyvumu ir naumu. Tyrimo metodologija. iame darbe tiriama suvokiamj veiklos efektyvumo ir naumo indikatori sveika su suvokiama vidine integracija. Itirti i sveik naudotasi dviej dali klausimynu. Pirmoji reklamin klausimyno dalis buvo sukurta pagal Adizes instituto (JAV) rekomendacijas. Antroje klausimyno dalyje respondent buvo klausiama apie suvokiamus efektyvumo ir naumo matavimus, t.y. suvokiamas ilgalaikes ir trumpalaikes pajamas bei peln. Trumpai tariant, respondentai turjo vertinti moni efektyvum ir naum bei vidin integracij pagal savo suvokim. Rezultatai. Tyrimo eigoje irykjo sveika tarp vidins integracijos ir mons efektyvumo bei naumo. is santykis suvokiamas kaip silpnas, taiau statistikai labai reikmingas. Tyrimo metu sukurtas rankis buvo patikrintas, kad bt galima patvirtinti klausimyno patikimum. Patvirtinta, jog rezultatai yra patikimi ir upildo literatroje apraom sprag. Gauti rezultatai taip pat yra prasmingi praktikams. Originalumas ir reikm. Tyrimas upildo literatroje minim sprag ir patvirtina, kad vidin integracija yra susijusi su mons suvokiamais efektyvumo ir naumo indikatoriais. Tyrimas atliktas Lietuvos kontekste, o tai prisideda prie vidins integracijos tyrim, atliekam ioje alyje. Tyrimo rezultatai turi tiriamj reikm Adizes metodologijos pristatytose iuolaikins teorijos ribose. Raktiniai odiai. Vidin integracija, abipusis pasitikjimas ir pagarba, iorin integracija, naumo ir efektyvumo suvokimo rodikliai. Darbo tipas. Kiekybinis tyrimas.

CONTENTS LIST OF FIGURES AND TABLES .................................................................................................... 6 1. 2. INTRODUCTION ....................................................................................................................... 7 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 ........................................................................................................................ 31 4

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

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

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 companys 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 companys performance. The aim from the scientific 7

perspective is to test the level of internal integration measurement and to relate the results with a perceived companys 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.

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 companys 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 companys 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 companys 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 9

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 10

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 companys 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 (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 is that the more energy can be put to integrate externally, the higher the profitability can be 11

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.

(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 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. 12

PAEI framework Short-term orientation Long-term orientation

Table 1 The PAEI framework

Effective Producers Entrepreneurs

Efficient Administrators Integrators

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. 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 13

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 integrators 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 companys life ends at the infant mortality stage by not being able to do the obligations. 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 14

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. 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

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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 companys integration by taking external and internal at once.

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 16

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). Jonkers (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. 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 Brhl (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.

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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 Zhaos (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 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 18

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. 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 19

how to operate in such environment. All this can be closely aligned to the purpose of internal integration. Problems are part of companys 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 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. Brhl, Horch and Osann (2010) assumed management control process as an enabler of innovation integration and Koch (2011) supports Hislops 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. Shenhars (1990) research recovered project types in dimensions of technological uncertainty and system complexity. What he 20

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. Brhl, 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. Brhl, Horch and Osann (2010) gave ground for the implications that higher management control gives higher control intensities in innovation 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 21

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. 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 companys 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 22

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 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 23

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 Lpez-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. Lpez-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 Lpez-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 Lpez-Fresno (2010) adds that it may still be worth trying because by implementing the IMS the following areas can be improved: decision making, better utilization of resources, enhanced communication, peoples 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 cooperation and communication across functions and indicates that theory and practice are not coherent. Braganza proposes the enterprise integration capabilities framework that can help to 24

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.
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) important to achieving and avoiding disbenefits in the short-term (Braganza, 2002) managers are confident that the initiative will significantly improve the organizations future competitive position and the consequences will affect the future strategic direction (Braganza, 2002) managers are unsure of the extent to which an initiative will improve the organizations future competitiveness or the potential benefits to be gained are uncertain (Braganza, 2002) Strategic Consequences for the organization

Contribution for future Competitiveness

Uncertain/Low Operational

Table 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 Porters 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 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. 25

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 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. 26

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.
200

150

GDP % Export %

100 Unemployment % 50 Companies % Natural person who has legal status %

0 2008 -50 2009 2010 2011

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 27

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. 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? 29

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 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).

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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 Masters 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.

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 employees 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. 31

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 others position. 7) Learn from colleagues. 8) Share common goals and vision. 9) Do not intimidate other peoples 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 shortterm 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 companys ability to keep the right competitiveness under changing economic 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

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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 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. 33

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 companys 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 companys 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 companys 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 (Cronbachs alpha is greater than 0,8). The third group measures the internal integration of companies (Cronbachs 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 peoples thinking even if they think differently from us + Listen to each other to understand each others 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 companys 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 companys 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 Spearmans 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 (Spearmans 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.
First stage Second stage Third stage

SRI R1 R2 CHIR1 R3 R4 LPI LRI C2 C3 SPI C1

Producer

Administrator

Entrepreneur

Integrator

Figure 4 Analysis strategy used to answer the first research question.

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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.

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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 companys 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.

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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.

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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.

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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.

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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.
Poor performance High performance

High internal integration

Mismanaged companys

Best place to work

Low internal integration

Worst place to work

Black sheep

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

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Effective

Efficient

Long term

LRI - Entrepreneur

LPI - Integrator

Short term

SRI - Producer

SPI - Administrator

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.

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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 51

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. Tannas 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 companys 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.

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 companys 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

57

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.

58

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 companys 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 producers 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 60

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 61

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 62

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 companys results on proposed methodological framework, a companys management can align companys 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.

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 companys 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.

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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 companys 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 companys 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.

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Wong, C.Y., Lai, K., Cheng, T.E. (2011). Value of Information Integration to Supply Chain Management: Roles of Internal and External Contingencies. In Journal Of Management Information Systems, 28(3), 161-200. Zhao, X., Huo, B., Selen, W., Yeung, J. (2011). The Impact of Internal Integration and Relationship Commitment on External Integration. In Journal Of Operations Management, 29(1/2), 17-32. doi:10.1016/j.jom.2010.04.004.

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8. APPENDICES Appendix 1 - tables

Table 1 Spearmans correlation matrix shows relation between internal integration questions and perceived performance indicators. **- significant at 0.01 (two tailed), *- significant at 0.05 (two tailed)
Perceived revenues in short term Accept that everybody are entitled to form their own opinion about matters Serve and support each other Receive and give honest feedback Learn from colleagues 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 peoples thinking even if they think differently from us Listen to each other to understand each others 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 ,153** Perceived profit in short term ,175** Perceived revenues in 3 year period ,182** Perceived profit in 3 year period ,173** CRI CHI includes CHIR includes CHIR1

No.

,180**

2 3 4 5 6 7

,115* ,149** ,140** ,207** ,075 ,057

,160** ,198** ,203** ,253** ,107* ,078

,160** ,180** ,198** ,227** ,082 ,100*

,201** ,177** ,201** ,267** ,125* ,141**

.245** .290** .128* .257** .219** .281**

+ + + + + +

+ + + +

+ + + + + +

,081

,095

,133**

,152**

.183**

,053

,098*

,037

,087

.135*

10

,150**

,091

,154**

,129*

.160*

11

,051

,007

,131**

,092

.223**

12 13

,000 ,011

,003 -,017

-,017 ,035

-,016 ,025

0.086 0.05

+ +

Table 2 Spearmans correlations between variables. **- significant at 0.01 (two tailed), *- significant at 0.05 (two tailed)
CHI Perceived revenues in short term (SRI) Perceived profit in short term (SPI) Perceived revenues in 3 year period (LRI) Perceived profit in 3 year period (LSI) ,151 ,170 ,211 ,215
**

CHIR ,192 ,254 ,244 ,261

**

CHR1 ,158 ,183 ,223 ,234

**

**

**

**

**

**

**

**

**

**

69

Table 3 Correlations of PPIs.

Correlations SRI Spearman's rho SRI Correlation Coefficient Sig. (2-tailed) N SPI Correlation Coefficient Sig. (2-tailed) N LRI Correlation Coefficient Sig. (2-tailed) N LPI Correlation Coefficient Sig. (2-tailed) N **. Correlation is significant at the 0.01 level (2-tailed). 1.000 . 406 .779
**

SPI .779
**

LRI .608
**

LPI .529
**

.000 397 1.000 . 398 .546

**

.000 401 .546

**

.000 394 .631

**

.000 397 .608

**

.000 393 1.000 . 402 .842

**

.000 393 .842

**

.000 401 .529

**

.000 393 .631

**

.000 393 1.000 . 394

.000 394

.000 393

.000 393

Table 4 Relation between internal integration and competitive retention

Correlations CR Spearman's rho CR Correlation Coefficient Sig. (2-tailed) N CHIR1 Correlation Coefficient Sig. (2-tailed) N **. Correlation is significant at the 0.01 level (2-tailed). 1.000 . 244 .305
**

CHIR1 .305
**

.000 244 1.000 . 410

.000 244

70

Table 5 Association between position in the company and CHIR1

Chi-Square Tests Asymp. Sig. (2Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases 104.970
a

df 120 120 1

sided) .834 .917 .077

99.175 3.125 103

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 Perceived revenues in short term .051 Perceived profit in short term .020 Perceived revenues in 3 year period .066 Perceived profit in 3 year period .202

Position in the company

Pearson Correlation Sig. (2tailed) N

CR * .290

CHIR1 .144

.039 51

.147 103

.622 95

.855 87

.527 94

.059 88

71

Table 7 Correlation matrix of case Tanna

Spearman's correlations

Int. Create of win-win situation out of most disagreements Int. Serve and support each other Int. Always deal with real issues Position in the company

Correlation Coefficient Sig. (2-tailed) N Correlation Coefficient Sig. (2-tailed) N Correlation Coefficient Sig. (2-tailed) N Correlation Coefficient Sig. (2-tailed) N Correlation Coefficient Sig. (2-tailed) N Correlation Coefficient Sig. (2-tailed) N Correlation Coefficient Sig. (2-tailed) N Correlation Coefficient Sig. (2-tailed) N Correlation Coefficient Sig. (2-tailed) N

Position in the company .104 .296 103 .053 .593 103 -.057 .565 103 1.000 . 103 .035 .737 95 .075 .489 87 .040 .705 94 .257* .016 88 .247 .080 51

Perceived revenues in short term .217* .034 95 .250* .015 95 .263* .010 95 .035 .737 95 1.000 . 95 .545** .000 86 .584** .000 94 .357** .001 87 .291* .050 46

Perceived profit in short term -.005 .965 87 .179 .097 87 .187 .083 87 .075 .489 87 .545** .000 86 1.000 . 87 .343** .001 85 .752** .000 86 .111 .490 41

Perceived revenues in 3 year period .179 .084 94 .157 .130 94 .223* .031 94 .040 .705 94 .584** .000 94 .343** .001 85 1.000 . 94 .529** .000 86 .285 .055 46

Perceived profit in 3 year period -.054 .620 88 .120 .266 88 .014 .896 88 .257* .016 88 .357** .001 87 .752** .000 86 .529** .000 86 1.000 . 88 .218 .161 43

CR .287* .041 51 -.108 .452 51 -.099 .489 51 .247 .080 51 .291* .050 46 .111 .490 41 .285 .055 46 .218 .161 43 1.000 . 51

Perceived short term

revenues

in

Perceived profit in short term Perceived revenues in 3 year period Perceived profit in 3 year period CR

Table 8 Correlation matrix of case Tanna

SRI Correlation Coefficient Sig. (2-tailed) N Correlation Coefficient Sig. (2-tailed) N Correlation Coefficient Sig. (2-tailed) N Correlation Coefficient Sig. (2-tailed) N Correlation Coefficient Sig. (2-tailed) N Correlation Coefficient Sig. (2-tailed) N SRI 1.000 . 95 ** .545 .000 86 ** .584 .000 94 ** .357 .001 87 * .291 .050 46 .154 .137 95 SPI ** .545 .000 86 1.000 . 87 ** .343 .001 85 ** .752 .000 86 .111 .490 41 .108 .321 87 LRI ** .584 .000 94 ** .343 .001 85 1.000 . 94 ** .529 .000 86 .285 .055 46 .090 .389 94 LPI ** .357 .001 87 ** .752 .000 86 ** .529 .000 86 1.000 . 88 .218 .161 43 .030 .784 88 CR * .291 .050 46 .111 .490 41 .285 .055 46 .218 .161 43 1.000 . 51 .180 .206 51 CHIR1 .154 .137 95 .108 .321 87 .090 .389 94 .030 .784 88 .180 .206 51 1.000 . 103

SPI

LRI

LPI

CR

CHIR1

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