‘Organizational Linkages: Understanding tho Productivity Paradox (1984) iptv ng edioperoneD009045042hra 1H Ml copy 1684, 2060 The Raa Academy of Seles igh ese 180_+ Roaeer perronaro sents the expected level of effectiveness. Ttis defined as the level of the indicator that is neither good nor bad. The basic idea of developing an indicator is to identify the funetion that defines what level of the in cator it takes to achieve what level of effectiveness. A series of specific steps is used to develop each contingency. Through a process of group discussion and consensus, the design team identifies the end points of the indicator, determines the effectiveness scores for those end points, determines the zero point (expected level), and then completes the other points in the function, ‘The process is somewhat complex conceptually, but in practice it is fairly easy. It also seems to produce contingencies that are reliable and useful over time (Pritchard et al., 1989), In the example contingency, the design team determined that the best possible amount of boards passing inspection is 100 percent. This indicates that the team believes it is realistically possible for all the boards to pass inspection. The minimum, or worst feasible level of the indicator, was set at 99 percent of the boards passing inspection. Per- formance at or near this level was seen by the design team as a major production problem. The zero point, the expected level of the indicator, is 99.4 percent passing inspection. The effectiveness values that corre- spond to the maximum and minimum indicator levels are +70 and -80. ‘The other values of the function are then determined, This scaling process is done for all indicators so that each indicator has a contingency. Completed contingencies for all the indicators in the example are shown in Figure 7-5. Next, the contingency set is pre- sented to higher management for approval. Frequently, disagreements arise about some of the contingencies; they are discussed and a com- promise is reached. Once all the contingencies are approved by higher management, the contingency set is complete. ‘There are two particularly important aspects to note about contin- gencies. First, the overall slope of the contingency expresses the rela- tive importance of the indicator. Steep slopes are produced for indica~ tors that are very important to the functioning of the unit. Indicators with flatter slopes are less important to the functioning of the unit in that variations in these indicators will have a lesser impact on total effectiveness. Thus, the differential importance of the indicators is cap- tured by the slope of the contingencies. ‘The second important aspect of contingencies is their nonlinearity. ‘This is reflected in the completed contingency in Figure 7-54, It shows that when the number of boards passing inspection is above the neu- tral point of 99.4 percent there is a large increase in effectiveness, How- ever, onee the passing rate reaches 99.7 percent, further increases do not represent as great a change. This nonlinearity is important be-