Perceived corporate identity/strategy dissonance: triggers and managerial responses

Journal of General Management Vol. 33 No. 1 Autumn 2007 71

Perceived corporate identity/strategy dissonance: triggersand managerial responsesDr Hong-Wei He

Lecturer in Marketing at Norwich Business School, University of East Anglia, UK

Professor John M. T. Balmer

Professor of Corporate Marketing, Brunel University, London

An emerging critical theme in the nascent ®eld of corporate marketing and corporate identityis the identity/strategy dyad. However, little empirical research has been undertaken toexplore such an interface in the ®eld of marketing. This article reports a theory-building casestudy relating to identity and strategy during a period of environmental transformation. It wasfound that identity and strategy were perceived dissonant by senior managers under thepresence of a strong industry-wide generic identity and associated perceived corporatestrategy controversy. The study revealed that managers responded to such dissonance bymeans of attributing, self-legitimating and adjusting their perceptions of the organisation'sidentity and strategy.

Introduction

Company identity has been established as a critical construct in the ®eld ofstrategic marketing (e.g. Cornelissen et al., 2007; He and Balmer, 2007;Brown et al., 2006; Melewar and Karaosmanoglu, 2006; Melewar et al., 2005;Simoes et al., 2005; Bhattacharya and Sen, 2003; Balmer, 2001; Abratt, 1989).Extant research suggests that e�ective management of corporate identitycould lead to better company performance in a wide range of aspects, e.g.enhanced customer-based corporate image, customer loyalty, employeeidenti®cation, commitment and loyalty, consolidation of investors' con®d-ence and relations and better community relations, etc. (e.g. Simoes et al.,2005). Increasing awareness of the strategic role of corporate identity (e.g.van Riel and Balmer, 1997; Marwick and Fill, 1997) suggest a need for morestudies to explore the interface between corporate identity and strategy. Thisstudy intends to contribute to the sparse amount of literature on the identity/strategy interface. The research makes an advance in our understanding ofthe domain and reveals that the identity/strategy dynamic is of crucialrelevance in understanding company identity change during environmentaltransition.

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Hong-Wei He and John M. T. Balmer

72 Journal of General Management Vol. 33 No. 1 Autumn 2007

Multiple schools of thought exist in the corporate identity literature. In thisstudy we de®ne corporate identity as the organisational members' perceptionand knowledge of `what the organisation is' (Albert and Whetten, 1985).Moreover, we also take a managerial stance; in other words, the CI measuredin this study refers to the managerial perceived CI, instead of an objective orsubstantive CI, or CI perceived by other stakeholders. Such a managerial-typecognitive approach to CI is relevant for our research objective, since seniormanagers are seen as the social agents whose knowledge, action and sense-making can intimately proximate the identity/strategy interplay within anorganisation (Hambrick and Mason, 1984; Giddens, 1984). This study hasthree principle ®ndings.

First, a perceived identity/strategy dissonance was pervasive and salientwithin the top management team during environmental transition. Second,such cognitive dissonance between identity and strategy was caused by bothinstitutional and organisational factors, and most importantly the interplaybetween institutional and organisational factors. At the institutional level,strong industry norms and generic identity act as strong reference point forsenior managers' understanding of their organisation's behaviour, especiallystrategic action; at the organisational level, corporate identity was de®ned to alarge extent by strong industry norms. Meanwhile, the strategic action (whichwas seen to be non-con®rmatory to industry norms) was perceived to bedissonant with corporate identity. Thirdly, the perceived dissonance betweencorporate identity and controversy and non-con®rmatory strategic actiontriggered managers' cognitive responses by means of attributing, legitimatingand identity adjusting. This psychodynamic process involving sense-makingof identity/strategy dissonance can be a useful explanatory factor for organ-isational change.

Identity studies

Identity studies have, over the last two decades, become a `hot' topic for bothscholars and practitioners alike (Balmer and Greyser, 2002). Its salience hasbeen attributed to the intrinsic power of the concept (Albert et al., 2000) andits utility during periods of change within the business environment (Balmer,2001). It has also been asserted by scholars that the identity concept is crucialto the comprehension of other related corporate-level concepts, e.g. corporatebranding, corporate communications, corporate image/reputation and cer-tainly corporate-level marketing. However, it has also been noted that theidentity construct is `confusing' (Whetten and Mackey, 2002), since there aremultiple paradigms (Gioia, 1998) as well as multiple schools of thought(Balmer, 1995; van Riel and Balmer, 1997).

Traditionally, identity studies at the organisation-wide level were dividedinto two broad schools (Hatch and Schultz, 2000). The ®rst school championsthe concept of corporate identity (CI), e.g. Olins (1978), van Riel (1995), vanRiel and Balmer, (1997), Balmer and Wilson (1998), Cornelissen and Harris(2001), Balmer and Greyser, (2002). This perspective has a strong inheritancethat is derived from marketing, corporate communications and graphic

Perceived corporate identity/strategy dissonance: triggers and managerial responses


design. In contrast, the other school focuses on organisational identity (OI)with there being considerable interest by organisational theorists, e.g. Duttonand Dukerich (1991), Ashforth and Mael, (1996), Whetten and Godfrey(1998), Gioia et al. (2000), Whetten and Mackey (2002). Albert and Whetten(1985) are credited with establishing this distinct school of thought relating toidentity and their work remains in¯uential.

Various attempts have been made to bring consistence to identity studiesin a number of special editions devoted to the area both in Europe and theUS, e.g. special issues on identity in the Academy of Management Review,Journal of Academy of Marketing Science, European Journal of Marketing andBritish Journal of Management. There has also been ®erce debate anddiscussion relating to the nature and sources of identity and the use ofmetaphor in explaining the concept (Cornelissen, 2002a, 2002b; Gioia et al.,2002a, 2002b; Haslam et al., 2003). Whereas a detailed discussion on thecomplexity of and the debates relating to identity is beyond the scope of thisarticle, we wish to elaborate how we de®ne the corporate identity concept asused in this study. We adopt a strategic, managerial and multidisciplinaryapproach to the identity concept. Such an approach has also characterisedthe work of scholars writing on identity from an organisational behaviourperspective such as Hatch and Schultz (2000), Gioia et al. (2000b) andWhetten and Mackey (2002) as well as from marketing scholars such asBalmer and Wilson (1998) and Balmer and Greyser (2002). The multi-disciplinary approach adopted here incorporates multiple perspectivesrelating to identity which takes cognisance of the identity's roots in organ-isational behaviour, marketing, corporate communications and graphicdesign. For this reason, the strategic perspective relating to identity addressesself-re¯ective questions by senior managers that ask: `who we are?' and/or`what we are'.

Identity and strategy

The strategic perspective relating to corporate identity seeks to addressquestions of cardinal importance to the organisation; as such, there is a primafacie link with strategy in that strategy is concerned with the future direction ofthe organisation and how such an objective can be materialised. A review ofthe literature found that the literature examining the identity strategy dyad isfragmented and comes from di�erent disciplines and approaches. Forexample, the identity/strategy dyad can be found in the works of organ-isational behaviourists whose focus is on the organisational identity concept(e.g. Dutton and Penner, 1993; Ashforth and Mael, 1996; Gioia and Thomas,1996); from scholars of marketing and corporate communications whosework focuses on the related concept of corporate identity (Olins, 1989;Marwick and Fill, 1997; Balmer and Soenen, 1999; Balmer and Greyser,2002; Bouchikhi and Kimberly, 2003) and from those taking a strategyperspective. Examples of the latter include research focusing on diversi®cationand spin-o� (Corley and Gioia, 2004), and others which concentrate oncompetitive advantage (Stimpert et al., 1998; Barney, 2000).



Corporate identity perspectives

In the corporate identity literature, Olins (1989; 1995) implied the salience ofidentity/strategy interplay by arguing that strategy is central to corporateidentity. For example, he commented that:

`̀ Corporate identity tells the world ± whether actively or by default ± justwhat the corporate strategy is.'' (Olins, 1989; p. 145)

`̀ Corporate identity addresses four questions: who you are, what you do, howyou do it and where you want to go''. (Olins, 1995; p. 3)

Similarly, van Riel (1995), adopting a corporate communication platform,proposed that a key aspect with regard to the management of an organisationwas that it should operate within the trivium of identity, strategy and theimage triangle and that corporate communications should take cognisance ofthe aforementioned triangle. Balmer and Soenen (1999), Balmer (2001), andBalmer and Greyser (2002) developed a more comprehensive model ofidentity management model, which highlights the various interfaces betweenidentity and its related concepts, such as image, vision and most importantly,strategy. Mention can also be made of the work of Marwick and Fill (1997) andStuart (1999) who proposed strategy-oriented models of corporate identitymanagement. Again, building on the work of Abratt (1989), Marwick andFill's (1997) model explicitly emphasises the interface between identity andstrategy:

`̀ Our proposition is that corporate identity forms a central and integrativefunction within the corporate and competitive strategy and that corporateidentity forms a pivotal role which can in¯uence the strategy content as wellas providing a corporate communication system to stakeholders.'' (Marwickand Fill, 1997; p. 401)

To summarise the literature on the identity/strategy dyad from a marketing/CI perspective, we noticed the following:

� Despite increasing interest on the topic itself, little empirical research existsin the marketing literature regarding the identity/strategy dyad.

� Most conceptual models on CI and strategy from marketing literature arenormative, prescriptive and less explanatory.

� Little attention was paid to the exact link between identity and strategy. Inother words, the identity/strategy dyad remains a black box.

Organisational behaviour and strategyperspectives

The salience of the interplay between identity and strategy is also a featurewithin the organisational identity and strategic management literatures.Within the organisational identity literature, the main line of reasoning isthat identity in¯uences strategy by acting as a cognitive ®lter or frame ofreference, which in¯uences how managers perceive the issues and events



(Dutton and Dukerich, 1991). It also provides a lens through which strategicissues are interpreted (Dutton and Penner, 1993; Gioia and Thomas, 1996).One important insight from this literature relates to the reciprocal nature ofthe interplay between identity and strategy with it being argued by Ashforthand Mael (1996) that strategy can con®rm or modify identity. Whetten andGodfrey's (1998) book on identity devoted one third of its space to theimplications of identity for strategy.

In the strategic management literature, the interplay between strategy andidentity is also a salient issue (Stimpert et al., 1998). For example, Abell (1980)argued that business de®nition (which is very similar to corporate identity)should be the starting point of strategy. A similar stance has been adopted byDrucker (1994) who proposed the concept of `the theory of the business'.According to him, a company's theory of the business has three parts:assumptions about the environment of the organisation; assumptions aboutthe speci®c mission of the organisation; and assumptions about the corecompetencies needed to accomplish the organisation's mission. And hefurther argues that these assumptions (theory of the business) should directa company's market and strategic behaviour. Moreover, Prahalad and Bettis'sconcept of dominant logic (1986; p. 491), de®ned as `̀ a mind set or a worldview or conceptualisation of the business and the administrative tools toaccomplish goals and make decisions in that business'' can help address theissue of corporate strategy, such as diversi®cation. It is quite obvious that theconcept of dominant logic has overlap with the concept of company identity.Thus their observation implies that company identity has implications forcorporate strategy.

In contrast to the marketing literature on identity studies, organisation andstrategy literature takes a more descriptive approach to studying the identity/strategy dyad. Moreover, the approach to identity concept itself is di�erent. Inthe literature on organisation and strategy, identity takes a cognitive andsense-making approach in that it is seen as part of organisational andmanagerial cognition. In sum, three perspectives of the identity/strategyinterplay exist in the organisation and management literature: sense-making,strategic analysis and institutional aspects. From a sense-making perspective(e.g. Dutton and Dukerich, 1991; Ashforth and Mael, 1996; Gioia andThomas, 1996; Fiol, 2002) identity and strategy are reciprocally related inthat identity can enact, constrain or facilitate strategy, and strategy canreinforce or express identity. From a strategic analysis perspective, identity,once it has been internalised as part of senior managers' cognitive structure,can direct managers' attention, retention and evaluation of issues, via whichidentity can shape strategic decision-making (Dutton and Penner, 1993).From an institutional perspective, identity is seen as organisational rules,norms and structure, all of which control strategic action. In addition,strategic actions are conceptualised as a symbolic representation and outcomeof identity process (e.g. Lounsbury and Glynn, 2001; Fiol, 2001; Hatch andSchultz, 2002; Pratt and Rafaeli, 1997; Glynn, 2000).

Despite of the contributions to this ®eld from a variety of bodies ofliterature, the exact relationship between OI and strategy remains implicit.As commented by Ashforth and Mael (1996) `̀ The precise linkages between an



organisation's identity, strategy, and behaviour ± between de®nition, choice,and action ± remain unclear.'' This present study aims to shed further insightson the identity/strategy dyad. More speci®cally the present study identi®ed anew construct: identity/strategy dissonance and a new theoretical frameworkoriginated by this new construct. The new construct and framework contrib-ute to the theoretical development of analysing the identity/strategy interface.

Method

Background

This study took place with a signi®cant player in the UK building societyindustry. UK building societies have been operating within a highly regulatedenvironment. It was after the 1986 Building Society Act that a more open andcompetitive environment took hold. Until the 1980s, building societies werebound by statute to engage in two core activities: mortgage lending andpersonal savings. The society under study traces its history back to the mid-1850s. In the aftermath of the 1986 Act, and with the appointment of a newCEO, the society pursued an aggressive and uninhibited expansionist strategy.However, because of the uncontrolled growth during the 1980s and the crashof housing market, the society had a much worse bad debt crisis during theearly `90s than any other building society. After successfully overcoming thedi�culties during the early 1990s, characterised by the crash in the UKproperty market which the society felt keenly owing to its reckless strategy ofthe 1990s, a new entrepreneurial CEO took the helm. Under his leadership thesociety embarked on a more measured strategy which was based on opportun-istic diversi®cation.

The general tenor of this approach was that the society's strategy of growthwould be constrained if there was undue reliance on mortgage lending andsavings. A key aspect of this strategy was informed by previous experience andthe need toavoid the reoccurrence of the society's previous di�cultiescharacterised by bad debt. As such, senior managers took the collective viewthat the new strategy of diversi®cation had advantages in terms of spreadingthe investment risk, while at the same time generating new streams of incometo the society. Such a strategy enabled the society to grow quickly during the1990s. Senior managers were spurred on to further opportunistic strategiesand this has informed the organisation's activities to the present. The societynow has a large number of subsidiaries dealing with a wide range of non-traditional building societies' businesses. Its subsidiaries contributed moreincome to the group than the building society businesses and its subsidiariesemploy many more people than the society itself. The massive number ofsubsidiaries was problematic in identity terms since it challenged the nature ofthe society. The answers to the questions `who are we and what are we?' werenow fundamentally di�erent from what they had been. Indeed, the society wasperceived by peer societies as more like a venture capitalist operation ratherthan a mainstream building society.



Research approach

As is customary with an interpretative paradigm of identity study whichconceptualises identity as self-re¯ective questions (Gioia, 1998; Corley andGioia, 2004), qualitative methods were employed for this study. A theory-building case study research design was employed, since such an approach isappropriate where the aim is to generate a substantive theory relating to theidentity strategy dynamic (Glaser and Strauss, 1967; Eisenhardt, 1989;Partington, 2000). This approach has been widely used in identity research(e.g. Dutton and Duckerich; 1991; Balmer, 1996; Corley and Gioia, 2004;Burgi and Roos, 2003; Bouchikhi and Kimberly, 2003).

Pilot study

The study starts with a pilot study which employs 12 semi-structured inter-views with experts of the building society industry and senior managers ofselected building societies. This is developed with documentation analysis ofthe industry background information. During the interviews questionsrelating to industry norms, competition, inter-organisation relations andhistory, etc. were asked. Altogether eight interviews were conducted, recordedand transcribed verbatim. The average interview length was about one hour.The sampling of interviewees was based on the principles of purposeful,theoretical, snowball and convenient sampling. The ®rst interview starts witha senior manager of the industry's trade body ± the Building SocietiesAssociation. The ®rst interview and initial documentation analysis enabledus to get access to 11 senior managers within the sector at a range of buildingsocieties from di�erent areas, of di�erent sizes and with di�erent strategic foci.This enabled us to obtain a more representative opinion.

The pilot study enabled the selection of case/organisation for an in-depthstudy on the relationship between identity and strategy. The case/organisationpresented in this paper was selected because of its widely recognised uniquestrategic behaviour ± for example, the pursuit of a controversial diversi®cationstrategy ± which is seen by most informants as non-con®rmatory to theindustry norms. The pilot study also con®rmed that:

� The UK building societies industry has undergone institutional trans-formation and is still undergoing this process.

� The industry has a strong generic identity, which is characterised by aunique ownership structure (mutuality, where customers are the ownersof the organisation); maintenance and championing of traditional values,strong industry cultural events and a high degree of commonality in termsof business values and norms.

Main case study

Data collection

Following the protocol of theory-building case study research, purposeful andtheoretical sampling was also applied for the main study (Glaser and Strauss,



1967; Eisenhardt, 1989; Lincoln and Guba, 1985). As mentioned earlier, thebuilding society selected for the in-depth case study reported here hadpursued a unique and unconventional strategy which had been coloured byits activities in terms of its diversi®cation and acquisition policies. Theinnovativeness in terms this building society's strategy and identity recom-mended this society as being a key case for determining key characteristics ofthe identity strategy dynamic (Yin, 1994). As is customary with a case studyresearch design, two methods of data collection, i.e. semi-structured interviewand documentation, were undertaken for the case study. Semi-structuredinterviews were the main source of data on the managerial perception ofcorporate identity, on their sense-making of strategic actions, on theirperception of the link between identity and strategy, and on how they evaluateand respond to their perceived link between identity and strategy. Documen-tation data were collected for the purpose of triangulation, and supplementarysources for understanding the historical events and institutional conditionsthat can explain the perceived link between identity and strategy (Miles andHuberman, 1994).

On the organisational level the sampling begins with top managers, becausethey play an important role on the course of identity management andstrategic action (Corley and Gioia, 2004). Data collection by semi-structuredinterviews within the society began by explaining to the CEO that the scope ofthe study including the informal interview guide which focused on issues suchas the informant's perception of the identity of the organisation, perceivedidentity changes over the last two decades, the current strategy of theorganisation, perceived strategy changes within the same period, perceivedchanges vis aÁ vis the relationship between identity and strategy over the sameperiod. The initial interview of the study took place with the CEO and itbecame apparent that not only was their particular interest in the saliency ofidentity, but that identity issues were not accorded an explicitly important roleby senior management. The CEO's interest in the identity issue helped us toget access to interviewing a further 11 senior managers within the society. Thesenior managers covered a broad range of the society's operations andincluded three commercial directors (having responsibility for three sub-sidiary groupings), the operations director, the ®nance director, three generalmanagers (in risk, marketing and administration) and the heads of directo-rates relating to corporate investment, customer relations and HR.

Data analysis

Interviews lasted for about one hour and were audio-taped and transcribedverbatim for inductive analysis through ®rst-order and second-order coding(Eisenhardt, 1989; Miles and Huberman, 1994; Strauss and Corbin, 1998). Asis customary with theory-building inductive method, analytic techniqueswere marshalled, i.e. constant comparison, asking questions and the writing oftheoretical memos. About 400 open codes were generated from this analysiswhich were then reduced into broader categories by means of the axial andselective coding processes. Although interview transcripts were the primary



source of data, company documentation and observational notes were alsoused to cross-check such insights and provide one means of triangulation.

Findings

The key construct derived from the case study is perceived identity/strategydissonance, which refers to a state that `what we are doing' does not con®rm`who/what we are and supposed to be'. Moreover, it was found that:

� The salience of a generic/normative industry identity and controversialdiversification strategy were the key triggers to perceived identity/strategydissonance.

� Senior managers responded to such identity/strategy dissonance by meansof attributing (searching external factors and reasons for taking thecontroversial strategy, though it is deemed to be inconsistent withidentity).

� Self-legitimating (justifying and rationalising the controversial strategy byadvocating its positive results on the organisation) and identity adjusting(dismissing the identity/strategy dissonance and strategy controversy byre-interpreting identity itself and identity's implications for strategy).

Perceived identity/strategy dissonance

As noted earlier, the building society adopted a controversial strategy ofopportunistic diversi®cation. It was controversial because it did not con®rmthe conventional core businesses of building societies as mortgage lending andpersonal savings. And there is no precedent for such strategy historicallywithin the building societies industry. Meanwhile, mutuality is still a salientand desired identity element for building societies. This generic identity acts asa normative guide for the behaviour and activities of building societies. As aresult, identity and strategy are perceived to be dissonant or in con¯ict by thesenior managers of the society when they were re¯ecting on `̀ who/what weare'' and `̀ what we do''. Because of the controversial diversi®cation strategy,the senior managers regarded the society's identity as being àlien to normal

Figure 1: Triggers and responses to perceived identity/strategy dissonance



building societies. Moreover the society's identity was ill-de®ned owing to itsstrategy of diversi®cation strategy and the existence of a large number ofsubsidiaries which focused on activities that are not traditionally equated withbuilding societies. The perceived dissonance between identity and strategyresulted in a dilemma for the top management team. As one senior managercommented:

`̀ So there is a quite interesting dilemma, because we are getting to a stagewhere our subsidiaries are contributing a high level of pro®t to the group, sowe are getting to an issue of ®nding a purpose, aren't we? When thesubsidiaries are contributing more pro®t, and you are still a building society,there is a dilemma coming out of that.''

The controversial diversi®cation strategy is also seen as detrimental to theidentity of the society and seen to have been a major factor contributing toidentity confusion and ambiguity. The following quotes from interviews areillustrative of this:

`̀ Because if we go back to our primary purpose, it is to lend on housing. But ifwe end up with a situation where we have a thousand people working in thebusinesses that lend mortgages, and we have ten thousands people workingin related activities, then what is our prime purpose?''

`̀ . . . is on the crux of identity confusion and ambiguity.''

`̀ But in terms of identity, what are we, that is what we are struggling. Wedon't know what we are; we don't know what we are going to do.''

`̀ The fact that we have those subsidiaries probably blurs our identity a littlebit as a building society. We probably don't see ourselves purely as a buildingsociety, we see ourselves as much more than that now.''

Based on the above analysis, the perceived identity/strategy dissonance can bede®ned as a state of perceived mismatch between the normative strategicexpectations derived from the identity of an organisation and the actualstrategy in place.

Triggers of identity/strategy dissonance

Two key factors have been identi®ed as the triggers of identity/strategydissonance from this study ± generic/normative industry identity and con-troversial diversi®cation strategy. The pilot study that involves literaturereview and secondary data analysis of British Building Societies and interviewswith the industry experts (including the Director General of the BuildingSociety Association and senior managers of selected building societies) foundthat there is a strong generic identity with the sector. For example:

`̀ There is certainly a collective Building Society culture, a collective BuildingSociety way of behaving and doing things, but despite the individualBuilding Societies' quite considerable e�orts to di�erentiate themselves byadvertising, the experience of dealing with them, their o�ces, their forms, theway in which their employees behave is so similar, that it is virtuallyimpossible to tell one from the other.'' (Olins, 1978).



Generic identity refers to the generic and central element of an organisationperceived to be applicable and normative to the whole industry. The salienceof generic identity is associated with strong industry culture, common threatsfacing the sector (e.g. demutualisation), historicity, regulation and legislation.The identity/strategy dissonance that characterises the society over recentyears is attributable to both historic as well as institutional factors. It is historicbecause ®rst, the generic identity and institutional pressure have always beenstrong in most part of the history of the UK Building Societies Movement.Second, the adoption of opportunistic diversi®cation by the society understudy is a result of continuous and incremental trial and error and is also aconsequence of the unplanned pattern of strategic behaviour.

It is institutional for two reasons. First, the existence of strong genericidentity is not only a product of historicity, but also the result of regulationand legislation, the common threats faced by the sector and the existence ofindustry-wide norms and values. For these reasons, the strong generic identityhas normative power to guide the behaviour of individual societies in thesector. Any strategy pursued by individual building societies that runs counterto these norms and values is seen to be controversial, and even injurious to thesurvival of other societies. Second, the institutional or generic identityconstrains the strategy of individual societies and is likely to a�ect howparticular strategies are viewed as in the case of the diversi®cation strategyfollowed by the society examined in this study. The following two quotes fromthe interviews are exemplars of the above:

`̀ I think there are quite a number of diverse businesses in the group. It is quitehard to get that identity as a group, because we are still seen as a buildingsociety (but) we are really operating as a ®nancial services organisation. Butour strategy has to be tied with the members' expectations of the society. Andthat complicates the whole thing. You know what I mean, if we areindependent ®nancial services group, you can immediately get a clearstrategy, but because you are a regulated building society, there are certainrules pertaining to that . . .''

`̀ It could be determined by our regulators in due course, because theregulators may sometime in the future say that you are actually not abuilding society, because your subsidiary activities are now the principlefocus of your business, and the building society is not. So they might say youcan't carry on doing that by still calling yourself a building society.''

Managerial responses to perceived identity/strategy dissonance

Since identity/strategy dissonance presents dilemmas and paradoxes for thesenior managers, they tend to use some cognitive techniques to reconcile suchdilemmas. It was found that cognitive reconciliation manifested itself bymeans of attributing, self-legitimating and identity adjusting. In general,individual managers ascribed to one type of reconciliation. In other words thethree tactics are mutually exclusive, but it was not always the case.



Attributing

Though diversi®cation strategy is perceived to be controversial, it was foundthat senior managers attributed a strategic reason to external and therebyuncontrollable factors, such as market conditions, external competition andorganisational reality. For example, senior managers often made the followingcomments during the interviews: `̀ diversi®cation and acquisition because ofunattractiveness of the lending market'', `̀ diversi®cation because of squeezedmargins'' and `̀ being opportunistic because the future is unpredictable''.

Self-legitimating

Self-legitimating is di�erent from attributing, in that legitimating refers to thecognitive self-validating explanations that accord legitimacy to strategy. Self-legitimating focuses on the expected positive outcomes/impact derived frombehaviour/strategy (the subject of legitimating) on the organisation. Thearguments of cognitive legitimating includes demonstrating the strategy'sconsistency with mutuality, with the emphasis on the bene®ts gained by andsociety at large, increased income generation for the society, improvedemployee remuneration, and in general, the positive consequences of self-legitimating. For example, the following comments were made by the seniormanagers:

`̀ More choice for customers''.

`̀ Diversi®cation helps utilising capital more e�ciently''

`̀ Diversi®cation supports the core businesses ®nancially''.

`̀ Give us more con®dence''.

`̀ Maintain competitiveness''.

`̀ Advantage of being more adaptive to change''.

The following two quotes are two of the best examples of how the society'ssomewhat audacious strategy is cognitively justi®ed and legitimated by seniormanagement:

`̀ To my mind, the bigger the subsidiary companies become, the more chanceyou have of the building society part becoming that true mutual and non-pro®t making operation . . . I would prefer to pursue the strategy that I've justoutlined as a little bit of a dream, if you like. That really would make usunique, if we can do that, we could create a presence of ®nancial services thatwould be unbeatable by anyone else. And you know we would immediatelyenhance our name awareness, our pro®le.''

`̀ I can't think of other organisation in the UK that is very similar to us. Partof it is similar to other building societies, part of it like a bank, part of it hasalmost venture capital types of operations, the way that we buy businesses,the way we start businesses. So I think we are relatively unique in the UK.And this uniqueness gives us competitive advantage.''



Identity adjusting

Cognitive modi®cation of the self-perception of corporate identity wasanother tactic used by senior management within the building society as ameans of reconciling the discrepancies between identity and strategy. Identityadjustment refers to the cognitive e�orts of modifying the identity (or re-interpretation of identity) in order to match it with the strategy. By this meansthe strategy can be justi®ed and legitimated by the cognitive modi®cation ofidentity. For example, some senior managers commented:

`̀ Diversi®cation does not go against the principle of mutuality''.

`̀ We are more like a ®nancial service organisation than a building society''.

`̀ We are entrepreneurial''.

`̀ Our view is that we've got multiple versions of self ''.

Discussion

Identity/strategy interplay

As noted earlier, little e�ort has been undertaken to empirically examine thedynamism of the identity/strategy dyad, let alone theoretical developments inthis area. The present study attempted to develop an initial theory on theidentity/strategy dyad by taking an innovative approach to identity studies,through managerial sense-making and psychodynamic issues. Moreover, thepresent study selected a context of institutional transition, which is seen to bequite ubiquitous in the contemporary corporate world. Although the limitedextant literature on the identity/strategy dyad focuses on the harmony andconsistence between identity and strategy, our study found that identity andstrategy are not always in harmony or consistence. Instead, due to a highvelocity of organisational and environmental changes, identity and strategyare perceived more often than before as inconsistent or dissonant. Therefore,identity/strategy dissonance can be seen as a particular, but also quite oftenhappening state and property of the identity/strategy dyad. Under such adissonant state of the identity/strategy dyad, managers tend to employ a widerange of cognitive ego defence mechanisms to maintain and enhance self-esteem, distinctiveness and continuity. In sum, the contribution of this studyto the broader identity/strategy dyad literature lies in its discovery of aparticular state/property of identity/strategy interplay and the categorisationof managerial cognitive responses to such a state of identity/strategy interplay.

Identity dynamism in the context of change

The ®ndings of the present study also expand our understanding of identitydynamism. Though identity denotes consistence and continuity regarding thepreservation of organisational self (Albert and Whetten, 1985), identity is alsoviewed as being dynamic (Gioia, Schultz and Corley, 2000; Balmer, 2001;Hatch and Schultz, 2002) and has strong interplay with strategy. Such identitydynamism is enabled by organisational sense-making. Continuity/stability,



one of the de®nitional dimensions of OI (Albert and Whetten, 1985), waschallenged by Gioia et al. (2000) by drawing on post-modernism, identity-image dynamism and historical revisionism. They argued that identity isdynamic and malleable and therefore adaptively unstable. Similar argumentshave also been made by marketing scholars (Balmer and Greyser, 2003; p. 39).Our study supports the notion that identity is dynamic, by ®nding thatidentity dynamism could be shaped by organisational members' cognitiveresponses to perceived identity/strategy dissonance, such as identity reinter-pretation (adjustment). Identity change can be triggered by changes atdi�erent organisational or institutional levels. At the organisational level,strategic change, such as strategic spin-o�s (Corley and Gioia, 2004), mergersand acquisitions, and the pursuance of a controversial diversi®cation strategy(as exempli®ed in this study) causes identity ambiguity, dissonance, crisis andconfusion, which in turn requires identity change. At the institutional level,institutional changes (changes of regulation, new entries of competitors,shrinking of the sector, moving into a new industry, etc.) are associated withchanges of social referents (to whom the focal organisation is compared),changes of conventions, norms and values. These changes, in turn, mightrender redundant the previously-held identity. As an interim change from oneidentity epoch gives way to another, identity ambiguity, dissonance, crisis andconfusion might pervade senior management's comprehension of the organ-isation.

The discovery of the three cognitive tactics suggests identity change isunderpinned by a sense-making process marshalled by senior managers. Sucha process manifests itself via attributing strategy to external and uncontrol-lable factors (attributing), justifying strategy by arguing its positive outcome/impact on the organisation (self-legitimating), or reinterpreting identity itselfand identity's implications for strategy (identity adjusting). We argue thatperceived identity/strategy dissonance is the intermediary and immediatecognitive factor triggering identity dynamism; and institutional and organ-isational changes are more substantive factors. Indeed, similar process hasbeen found in other research. For example, Elsbach and Kramer (1996) foundthat identity threats (caused by external ranking) lead to senior managers'selective interpretation of their organisational identity in the US businessschools sector. Brown and Starkey (2000) explained organisational egodefences, e.g. denial, rationalisation, idealisation, fantasy and symbolisation.Our ®ndings of attributing, self-legitimating and identity adjusting can beseen as three sub-mechanisms of rationalisation within the broader range oforganisational ego defence mechanisms.

Attributing

The ®nding of attributing is also underpinned by attribution theory (Heider,1958). Attribution theory is a theory dealing with the inferences we makeabout the causes of our own behaviour and that of other people. Theconventional attribution is based on self-serving bias, which refers to thetendency to distort our assessment of our own behaviour by attributing oursuccess to personal factors, and our failure to situational factors. Most



attribution studies in the organisational and management domain focuses onthe subject of attributing as organisational or managerial performance, that is,success or failure to deliver certain performance outcome. For example, Lant,Milliken and Batra (1992) investigating the ways in which managers explainpoor performance records, demonstrated that within turbulent environ-ments, organisational actors are more likely to attribute poor past perform-ance records to external factors, whereas in stable environments, no suchtendency is observed, which partially supported fundamental attributionerror (Ross, 1977). On the other hand, this study found that the subject ofattributing within an organisational context is wider than merely performanceoutcomes, e.g. ®nancial performance. Strategy, controversy and identity/strategy dissonance are also subject to attributing.

Attribution has a strong interplay with identity and learning. First, identityadjustment is one form of identity-focused critical self-re¯exivity which,suggested by Brown and Starkey (2000), is a valuable means of facilitatingorganisational learning. Second, errors of attribution can be a cause ofconstraining organisational learning. Thus it is interesting to discover thatthe facilitator of organisational learning (identity adjustment) and impedi-ment (attribution error) coexist when an organisation is facing identity/strategy dissonance. Third, as noted earlier, identity in¯uences attribution byacting as a basis for judging the legitimacy of strategic behaviour of theorganisation. As noted by Kogut and Zander (1996, p. 506) `̀ Identity doesmore than provide a de®nition of membership; it also in¯uences the attribu-tion of self-interested behaviour.''

Attribution also has a motivational basis (Taylor and Brown, 1988), forinstance with regard to the preservation and credibility relating to corporateidentity claims. In this study, senior managers attributed the controversy toenvironmental factors. As such, their perceptions or claims of corporateidentity remain intact and preserved. However this attribution bias might leadto managerial failure of experiential learning and inertia in terms of identity.For example:

`̀ Those who more readily see the e�ect of environmental events in explainingpositive outcomes, and who more readily emphasize their own role inproducing negative outcomes, may be able to learn more from pastexperience in order to improve future performance'' (Clapham andSchwenk, 1991; p. 228).

Self-legitimating

Under the situation of identity/strategy dissonance, senior managers not onlyattribute, but also legitimise and justify their articulation of identity and/orstrategy. Unlike attributing, which passively searches for external factors toexculpate personal factors for organisational or managerial failure or con-troversy, self-legitimating is more positive and internal-oriented. To note,self-legitimacy is also slightly di�erent from organisational legitimacy (Els-bach et al., 1994; Suchman, 1995) with the latter referring to the socialacceptance by the external stakeholders of the organisational behaviour and



activities that are perceived to be consistent with broader social norms andvalues. Instead of social acceptance, self-legitimacy resides in organisational®tness in terms of its strategic behaviour meeting the expectations of anormative identity. Despite the subtle di�erences, self-legitimacy is closelylinked with organisational legitimacy, since the perception of organisationalgoodness cannot escape the e�ect of social norms and values. Self-legitimat-ing, like attributing, also acts as a self-correcting mechanism to bring identity/strategy discrepancy back into alignment whilst preserving the corporateidentity. However, some managers resorted to another tactic ± adjustingcorporate identity to ®t the strategy.

Limitations and further research

It is worth emphasising that whereas the ®ndings of our study do not representthe full picture of the link between identity and strategy, they make asigni®cant contribution to our understanding on identity/strategy interplayin that they highlight the cognitive dynamism between identity and strategyamong senior managers in the context of institutional transformation, whichin turn is ubiquitous in the contemporary environment. More speci®cally, thispresent study is limited in two ways. First, it has a senior management focus. Itis highly possible that middle or functional managers or ordinary employeesalso perceive such dissonance. Second, the model established from the study isa process and an idiosyncratic theory rather than a variance theory. Therefore,it is hard to generalise it in another context. Nevertheless, it is revealing andlikely to be transferable to similar contexts. Given the fact that institutionaltransformation and organisational changes are accelerated in the post-modern and technophilic corporate world, the ®ndings of this study can betransferred to a wide range of contexts. But such transfer should be takencautiously. Finally, the present study was limited by temporal factor. A moreextensive longitudinal study may be more appropriate, but it involves muchmore costs and time, and much better access, which is hard to gain.

Future research into the identity/strategy dissonance/dynamic could ex-amine its impact on other organisational members, e.g. middle managers andordinary organisational employees. In terms of the interplay between identityand strategy, further research may examine in greater details the in¯uencesidentity exerts on strategy and/or vice versa. In terms of corporate commu-nications, it will be fruitful to examine how top managers translate their tacticsof tackling perceived identity/strategy dissonance into corporate messages.What are the links between these tactics and corporate communication,organisational impression management, public relations, and corporatebranding? What are the consequences of di�erent managerial cognitiveresponses to such dissonance? Why and how do senior managers di�er interms of their cognitive responses? What other factors might cause identity/strategy dissonance, besides institutional factors and sense-making of strategicaction? How can business diversi®cation and market choice in¯uence corpo-rate identity, image and reputation?



Conclusion

By taking a grounded theory approach, the case study discovered a keyconcept relating to identity/strategy interplay ± perceived identity/strategydissonance. It suggests that misalignment between identity and strategy isproblematic, which results in perceived identity/strategy dissonance. Bothinstitutional factors (e.g. generic/normative identity) and organisationalfactors (e.g. controversial strategy) can be triggers to such dissonance. It isalso found that perceived identity/strategy dissonance is dealt with by thesenior managers by several cognitive mechanisms, e.g. attributing, self-legitimating and identity adjusting. It suggests and con®rms that self-correct-ing mechanisms exist within organisation. The study reinforces the salience ofidentity/strategy interplay. It suggests that identity and strategy interplaybecomes more salient during institutional and organisational change. More-over, from a strategic marketing point of view, the implication for seniormanagement is to make use of these defence mechanisms and use them toguide corporate communications to various stakeholders, e.g. middle man-agers, other employees, customers, regulators and the general public. By suchmeans, legitimacy could be (re)gained and corporate reputation maintainedor even enhanced. Moreover, the study suggests a reciprocal and mutualapproach to manage both strategy and corporate identity. A special monitor-ing system could be put in place to consistently check the nature of mutuale�ects (mutual reinforcing or mutual diminishing) of both strategy andidentity, so that preventive remedies could be identi®ed and applied.

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Dr Hong-Wei He is a Lecturer in Marketing at Norwich Business School, University of EastAnglia. Prior to this, he taught at University of Surrey and completed his Ph.D. on CorporateIdentity and Strategy from the Bradford School of Management. Dr He's research interestsinclude corporate identity, organisational identity, brand management, and corporate-levelmarketing. His research has been published or accepted for publication in journals such asEuropean Journal of Marketing, Journal of Marketing Management, Journal of Marketing Theory andPractice, International Journal of Bank Marketing, and Journal of Brand Management.

Professor John M.T. Balmer is Professor of Corporate Marketing at Brunel University, London.Previously, he was Professor of Corporate Identity at Bradford School of Management wherehe went on to hold the Chair in Corporate Brand/Identity Management. He has served as theguest editor of 12 special editions of academic journals on corporate marketing related topicsand his published output has appeared in California Management Review, Journal of GeneralManagement, European Journal of Marketing, Journal of Business Ethics, Long Range Planning,International Studies of Management and Organizations, and the British Journal of Management



amongst others. He is the co-author, with Professor Stephen Greyser, (Harvard BusinessSchool) of Revealing the Corporation (Routledge 2003) on corporate identity, image, reputation,corporate branding and corporate-level marketing, and the founder-director of the Inter-national Corporate Identity Group (1994) which was launched in the House of Lords in 1995 aswell as founder director of the International Centre for Corporate Identity Studies atStrathclyde Business School. He was worked with a variety of organisations on corporatemarketing projects including the Swedish Monarchy, the BBC, the WPP Group and MercedesBenz.

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Perceived corporate identity/strategy dissonance: triggers and managerial responses

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