ANZAM - ISBN 978-0-9875968-5-7

Abstract

We investigate how operational governance formalization and flexibility affect organizational performance, both directly and jointly. We build our arguments using learning mechanisms. Based on 434 observations from project managers in a large multi-department government organization, we hypothesize a positive-increasing U-shaped learning curve effect regarding governance formalization and a positive effect regarding governance flexibility. Most importantly, we hypothesize that governance formalization and flexibility exhibit joint effects. We find that governance flexibility increases performance when formalization is low and decreases performance when formalization is high. Our finding that flexibility can be counter-productive to performance is novel. Overall, this paper contributes to the operational governance literature by clarifying how learning mechanisms explain the joint effects of governance formalization and flexibility