Top Management Teams




The top management team (TMT) literature concerns itself with the study of the most senior teams of executive directors in both private and public sector organizations. These teams are studied in terms of their makeup, their activities, and the extent to which either of these variables has a causal relationship with organizational performance. Top management teams are widely acknowledged to play a key role in organizational success and failure and, as such, generate significant research interest.




Although sharing some themes in common, the TMT literature does not normally include work that is interested in boards of directors and issues surrounding corporate governance. These literatures look at the next level up in organizational hierarchy where the decision making body is made up of directors that are internal (executive) and external (non executive) to the organization and are answer able to (or representative of) the owners of the business and other key stakeholders.

The TMT literature is tangential to other fields. As the most senior managers within the organization, it is the task of the membership of the TMT to both develop and lead the implementation of the strategy that organization is seeking to follow to achieve success. Therefore, both the leadership and strategic decision making literatures are relevant to and share common themes with the TMT literature.

Different perspectives have been used to explore the nature, role, and impact of TMTs.

One of the more widely known and recognized is the literature on the demographic profile (e.g., size, turnover, tenure, occupational background) of TMTs. In general, this research examines relationships between such variables and the organization’s strategy or its financial performance. One of the causal mechanisms proposed to account for these relationships is the effect of demographic characteristics on the information processing capacity of the TMT. Thus, for example, Haleblian and Finkelstein (1993) argue that larger TMTs have a greater degree of information processing capacity, that this leads to better strategic decisions, and thus, that the size of the TMT is positively associated with organizational performance. A similar line of causal reasoning connects the demographic characteristics of the TMT to its beliefs or knowledge base. Thus, for example, Michel and Hambrick (1992) argued that the more an organization’s diversification posture relied on interdependence among business units, the more likely that operations, marketing, sales, and R&D would be represented in the functional backgrounds of TMT members. The most widely cited work within this genre is Hambrick and Mason’s (1984) theoretical paper in which they outline both the rationale and the methodology for using demographic variables in the study of TMTs. This paper is usually recognized as launching this stream of research, which Hambrick and Mason call the ”upper echelons perspective.”

Another body of work that is focused on the TMT is the strategic decision making literature. One stream of debate and discussion within the strategic decision making literature breaks the decision making process into subtasks: scanning for strategic issues, interpreting these issues, and making a strategic choice. Here, the cognitive processes, biases, and routines of the members of the TMT are explored. For instance, one finding is that how strategists categorize a strategic issue influences strategic choice: when issues are categorized as threats, the decision is more likely to affect a significant change in strategy. Other researchers focus much more on the processes associated with strategic choice. One stream of work analyzes the comprehensiveness of strategic decision processes (Fredrickson 1984; Fredrickson & Mitchell 1984). A high degree of comprehensiveness means that the TMT pursues a more rational approach to decision making, including the articulation of clear goals and the analysis of multiple alternatives, while a low degree of comprehensiveness means that decision making follows a more incremental pattern, involving a more limited comparison of a potential course of action against the status quo. Another body of work on TMT decision process examines the extent to which TMT members agree or disagree about strategic decisions, i.e., the extent of strategic consensus. Both the antecedents and outcomes of consensus have been explored (e.g., Dess 1987; Dess & Origer 1987; Woolridge & Floyd 1989; Dess & Priem 1995). Others focus on the manner in which the TMT interacts in the process of achieving agreement. Three modes of interaction are usually discussed: devil’s advocacy, dialectical inquiry, and consensus building.

A more recent perspective on TMT decision making has sought to bring a finer grained understanding to the subject. Here a cognitive lens is used to explore how TMT members think about (Huff 1990) or make sense of (Weick 1995) the internal and external organizational environments and their role as strategists. The cognitive strategic groups literature would be an example (e.g., Porac et al. 1989; Reger & Huff 1993; Johnson et al. 1998). Here, researchers seek to account for strategic outcomes in terms of the way strategists think about the structure of their competitive environment.

So far the discussion of TMTs has been focused on the outcomes and nature of TMT activity and has been clearly aligned to the strategic decision making literature. However, there is a body of work within the TMT literature that is concerned less with the strategic nature of TMT activity per se than with the exploration of the characteristics of those who make it to the TMT. This is largely contingency based theorizing and moreover is more heavily focused on exploring the characteristics of those managers who make it to the CEO role rather than the executive suite generally. Norburn’s (1989) study is an example of work that focuses on CEOs; he describes a set of psychological characteristics that predict CEO or director status.

There is a smaller literature that examines characteristics of individual TMT members, not in terms of who makes it to the top, but rather in terms of what happens to executives physically and psychologically when they become members of the TMT. This literature is concerned with the causes and consequences of executive health.

Finally, there is a small literature that, encompassing all of the above and more, seeks to create a typology of TMTs. Often papers on this topic are designed for a practitioner as opposed to academic audience. Pitcher (1997) is a good example of work that is practically oriented and academically sound.

The primary methodological problem with studying the TMT has been access. That is, the upper echelons of organizations are comprised of powerful people who are not inclined to become objects of research. In the past, the preference has been to theorize using data that are in the public domain. Hence, the demo graphic methodology discussed at the outset has been used widely. However, the use of such surrogate measures (using demographic variables as a surrogate measure of TMT members’ attitudes and beliefs) has been criticized (Lawrence 1997; Markoczy 1997) and calls have been issued for researchers to carry out more work that collects primary data from the TMT.

The issue of sensitivity and access remains, however. It is rare for a researcher to gain access to a TMT in order to observe members at work and ask them detailed questions about their activities. Balogun et al. (2003) argue that in order to induce such cooperation there must be a clear quid pro quo for the organization. Also, it is the responsibility of the researcher to have a meaningful contribution to offer the team (over and above feedback from the research itselfs). This sentiment is also echoed elsewhere in the management literature (Maclean & Macintosh 2002).

References:

  1. Balogun, J., Huff, A. S., & Johnson, P. (2003) Three Responses to the Methodological Challenges of Studying Strategizing. Journal of Management Stu dies 40(1): 197-223.
  2. Campbell Quick, J., Gavin, J., Cooper, C., & Quick, J. (2000) Executive Health: Building Strength and Managing Risks. Academy of Management Executive 14(12).
  3. Dess, G. (1987) Consensus on Strategy Formula­tion and Organizational Performance: Competitors in a Fragmented Industry. Strategic Management Journal 8: 259-77.
  4. Dess, G. G. & Origer, N. K. (1987) Environment, Structure, and Consensus in Strategy Formula­tion: A Conceptual Integration. Academy of Management Review 12(2): 313-30.
  5. Dess, G. G. & Priem, R. I. (1995) Consensus-Per­formance Research: Theoretical and Empirical Extensions. Journal of Management Studies 32(4): 401-17.
  6. Fredrickson, J. W. (1984) The Comprehensiveness of Strategic Decision Processes: Extensions, Observations, and Future Directions. Academy of Management Journal 27: 445-67.
  7. Fredrickson, J. W. & Mitchell, T. R. (1984) Strategic Decision Processes: Comprehensiveness and Performance in an Industry with an Unstable Environment. Academy of Management Journal 27: 399-424.
  8. Haleblian, J. & Finkelstein, S. (1993) Top Manage­ment Team Size, CEO Dominance, and Firm Performance: The Moderating Roles of Environ­mental Turbulence and Discretion. Academy of Management Journal 36: 844-63.
  9. Hambrick, D. C. & Mason, P. A. (1984) Upper Echelons: The Organization as a Reflection of its Top Managers. Academy of Management Review 9(2): 193-206.
  10. Huff, A. S. (Ed.) (1990)Mapping Strategic Thought. Wiley, Chichester.
  11. Johnson, P., Daniels, K., & Asch, (1998) Mental Models of Competition. In: Eden, C. & Spender, J.-C. (Eds.), Managerial and Organizational Cognition: Theory, Methods, and Research. Sage, London.
  12. Lawrence, B. S. (1997) The Black Box of Orga­nizational Demography. Organization Science 8(1): 1-22.
  13. Maclean, D. & Macintosh, R. (2002) One Process, Two Audiences: On the Challenges of Manage­ment Research. European Management Journal 20(4): 383-92.
  14. Markoczy, L. (1997) Measuring Beliefs: Accept No Substitutes. Academy of Management Journal 40(5): 1228-42.
  15. Michel, J. & Hambrick, C. (1992) Diversification Posture and the Characteristics of the Top Man­agement Team. Academy of Management Journal 35: 9-37.
  16. Norburn, D. (1989) The Chief Executive: A Breed Apart. Strategic Management Journal 1: 1-15.
  17. Pitcher, P. (1997) The Drama of Leadership. Wiley, Chichester.
  18. Porac, J., Thomas, H., & Baden Fuller, C. (1989) Competitive Groups as Cognitive Communities: The Case of the Scottish Knitwear Manufacturers. Journal of Management Studies 26, 4 (July).
  19. Reger, R. K. & Huff, A. S. (1993) Strategic Groups: A Cognitive Perspective. Strategic Management Journal 14: 103-24.
  20. Weick, K. E. (1995) Sensemaking in Organizations. Sage, London. Woolridge, B. & Floyd, S. (1989) Strategic Process Effects on Consensus. Strategic Management Journal 10: 295-302.

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