Elsevier

The Leadership Quarterly

Volume 17, Issue 5, October 2006, Pages 441-453
The Leadership Quarterly

Top management team behavioral integration, decision quality, and organizational decline

https://doi.org/10.1016/j.leaqua.2006.06.001Get rights and content

Abstract

Little research on top management teams (TMTs) has sought to understand how group processes may influence organizational outcomes. This study examined the role of TMT behavioral integration in explaining the quality of strategic decisions and how these constructs together influenced organizational decline. Findings from survey data of 116 TMTs and a follow up case study show that TMTs in which members reported higher behavioral integration made better quality strategic decisions. Behavioral integration of TMTs was negatively related to organizational decline both directly and indirectly through the perceived quality of strategic decisions. We discuss implications for more fully utilizing the capabilities of TMTs to confront organizational threats.

Introduction

Recently there has been much interest in better understanding the role of top management teams (TMTs) in organizational leadership. A growing body of literature indicates the merits of shared leadership (Pearce & Conger, 2003) and provides “clear support for the conclusion that the top team, rather than the top person, has the greatest effects on organizational functioning” (O'Reilly, Snyder, & Boothe, 1993, p. 150). Much of this research has linked TMT attributes (size, age, tenure, educational and functional background) to organizational outcomes (e.g., Eisenhardt & Schoonhoven, 1990, Hambrick et al., 1996, Wiersema & Bantel, 1992). However, inconsistent findings have raised serious questions regarding the implications of TMT characteristics for organizational outcomes.

Internal TMT processes may play a key role in explaining adaptive and maladaptive organizational responses to change (Hambrick, 1998, Mooney & Sonnenfeld, 2001, Simsek et al., 2005). Various group process constructs have been studied, including social interaction among the TMT members (O'Reilly et al., 1993, Smith et al., 1994), conflict surfacing, debate, and sharing of information (Eisenhardt & Zbaracki, 1992, Pelled et al., 1999, Peterson et al., 1998, Peterson et al., 2003). This research indicates that TMT group processes may explain variance that was left unexplained by TMT heterogeneity alone, and that TMT characteristics are important to outcomes only insofar as they influence these group dynamics (Lawrence, 1997). We argue in this article that strong behavioral integration (Hambrick, 1994) within the TMT is particularly important for organizations to respond effectively to the situations of potential decline they face periodically. Even successful organizations have experienced organizational decline, and every year many previously successful companies disappear because of inadequate response to decline (Probst & Raisch, 2005). Therefore we tested the role TMT processes play in organizational decline.

Section snippets

TMT behavioral integration

As reviewed by Edmondson, Roberto, and Watkins, “teamwork allows the CEO to engage in a participative group process through which diverse members wrestle together with difficult issues to make decisions and build commitment to implementing them, giving rise to strategic leadership effectiveness” (2003, p. 298). However, these authors drew on diverse sources to observe that TMTs often fail to manage their group processes effectively, resulting in groupthink (Janis, 1982), flawed judgment,

Sample and data collection

The research population was drawn from a list of firms prepared by thirty managers who participated in an executive training program at a large university in Israel. The managers created a target research population of 217 firms from various industries (agriculture, chemical, food, paper, printing, electronics, software, services, communication, textile, pharmaceutical and real estate). Next, a questionnaire developed by the authors was pre-tested among these managers to assess its clarity.

Results

Prior to testing the research hypotheses, items were subjected to a principal components factor analysis with Varimax rotation. This analysis produced five factors that together explained 67.35% of the overall item variance. The first factor, comprised of the TMT behavioral integration (eigenvalue = 8.90), had factor loadings ranging from 0.69 to 0.87. The second factor, comprised of the perceived quality of strategic decisions items (eigenvalue = 3.67), had factor loadings ranging from 0.63 to

Theoretical interpretations

A substantial number of studies have linked TMT attributes (size, age, tenure, educational and functional background) to organizational outcomes (e.g., Eisenhardt & Schoonhoven, 1990, Hambrick et al., 1996, Wiersema & Bantel, 1992). However, inconsistent findings have raised serious questions regarding the causal implications of TMT characteristics for organizational outcomes. As observed by Hambrick (1994): “(scholars) have treated actual group cognitions, values, and interchanges as a ‘black

Acknowledgements

Earlier versions of this paper were presented at the Israeli Strategy and Entrepreneurship Forum and the Academy of Management Meeting in New Orleans. The insightful comments and suggestions of the editor and three anonymous reviewers are greatly appreciated. All remaining errors are ours.

Abraham Carmeli is a faculty member in the Graduate School of Business Administration and the Department of Political Science (joint appointment) at Bar-Ilan University. He received his Ph.D. from the University of Haifa. His current research interests include complementarities of intangible resources, top management teams, organizational prestige and image, and individual behaviors at work. His research appeared in such journals as Managerial and Decision Economics, Human Resource Management,

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    Abraham Carmeli is a faculty member in the Graduate School of Business Administration and the Department of Political Science (joint appointment) at Bar-Ilan University. He received his Ph.D. from the University of Haifa. His current research interests include complementarities of intangible resources, top management teams, organizational prestige and image, and individual behaviors at work. His research appeared in such journals as Managerial and Decision Economics, Human Resource Management, Organization Studies, Public Administration, and Strategic Management Journal, among others.

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    The authors equally contributed to this paper.

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