Unlocking the sustainability of medium enterprises: A framework for reducing cognitive biases in sustainable performance management

Abstract

Medium Enterprises (MEs) are significant contributors to global economic development. Integrating sustainability practices in their business can support MEs worldwide to become more sustainable, improving companies’ performance and stakeholders’ expectations. Nevertheless, few MEs adopt sustainable practices. Following Behavioral Decision Theory and Behavioral Strategy literature, we argue that this can be associated with their managers’ decision-making processes – apart from not possessing considerable resources like large companies. Via a mixed-method research design involving 277 Italian ME managers, we investigate the cognitive biases that hinder the development of a sustainable performance management system (SPMS) in MEs. We found the most prominent biases influencing SPMS development. Then, we developed a ‘SPMS de-biasing funnel’ framework. We propose some corrective actions to reduce the impact of the most critical cognitive biases that influence SPMS development, allowing related beneficial potential outcomes.