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The Effect of Top Management Teams Published: Sunday, September 27, 1998 By: Dr. Manuel Angel Morales

I am sure it is possible to talk about an upper - echelons theory of management that emphasizes the organizational effects of the composition of the top management group. Both strategic choices and organizational performance are related to the characteristics of the top management team because of the understanding that top managers structure decision situations to fit their view of the world. A central requirement for understanding organizational behavior is to identify those factors that direct or orient execution attention. Thus, a word of alert! A manager or even an entire team of managers cannot scan every aspect of the organization and its environment. The manager`s field of vision (those areas to which attention is directed) is restricted, posing a considerable limitation on eventual perceptions and interpretations. The manager`s perception are further limited because one selectively perceives only some of the realities included in the field of his vision. The bits of information selected for processing are interpreted through a filter woven by one`s cognitive base and values.

This means that the individual`s worldview is probably related to his or her functional background, education, and experience, all of which affect the information one, attends and how one processes that information. Thus, research on the characteristics of a management team emphasizes heterogeneity in functional and expertise backgrounds, the amount of time the team spends working together, experience, diversity and similarity.

The evidence clearly suggests that team effects are important in understanding organizational change and performance. Moreover, the data is consistent across diverse industries, companies and organizations. An executive team`s abilities to proactively initiate and implement frame-breaking changes are important factors which make a difference between organizational renewal and greatness versus complacency and eventual decline.

A recent study by Finkelstein and Hambrick examined 100 organizations in the computer, bio-technology, chemical and natural gas industries. They found that long tenured managerial teams tended to have more persistent strategies and that the strategies and performance more closely conformed to industry world-class norms. They also found that the effects of top management team composition were strongest in those competitive markets that permitted managers the greatest decision-making discretion. Any effects of top management teams will be stronger in markets that permit managerial discretion and in which performance variation, by reasons of contingencies, is consequently greater.

On the other hand, if not properly managed there could be a negative relationship between top management team tenure and organizational innovation. To sum up, top management team`s size tenure, heterogeneity, social integration, informal communication and communication frequency affect the quality of its performance.

Copyright 1998 QBS, Inc. 
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