Вы находитесь на странице: 1из 39

Centre for Marketing


TOP MANAGEMENT CHARACTERISTICS AND
STRATEGIC DECISION PROCESSES

Vassilis Papadakis
Patrick Barwise

Centre for Marketing Working Paper


No. 96-101
March 1996

Vassilis Papadakis is an EC Post Doctoral Fellow at London Business School. Patrick Barwise is
Professor of Management and Marketing, and Director of the Centre for Marketing, at London
Business School. An earlier version of this paper was presented at the British Academy of
Management Conference, Sheffield, 11-13 September, 1995. This paper received valuable
support from an E.U. Post Doctoral Fellowship.

London Business School, Regent's Park, London NW1 4SA, U.K.


Tel: +44 (0)171 262-5050 Fax: +44 (0)171 724-1145
VPAPADAKIS@lbs.ac.uk http://www.lbs.ac.uk

Copyright © London Business School 1996.


Top Management Characteristics and

Strategic Decision Processes

ABSTRACT

This paper explores the influence of top management characteristics on the process of

making Strategic Decisions (SDs). Empirical testing is based on a sample of 70 SDs in

industrial enterprises, using a combination of interviews, questionnaires and archival data. The

results suggest that (a) the characteristics of both the top management team (TMT) and the

CEO influenced the strategic decision-making process, but the former had more influence, and

(b) the TMT and CEO influenced different dimensions of the process. The single most

important factor was the TMT’s “aggressiveness” (decision to beat the competition, attitude to

innovation, risk propensity). Results lend support to the “upper echelons” perspective, but

suggest that in studying strategic decision-making processes both CEO and TMT

characteristics should be considered. Such an approach should provide a more reliable view of

strategic processes and the evolving dynamics.


1. INTRODUCTION

Two important themes of strategy research over the last ten years have been (a) the role of

top management (Bantel 1993; Hambrick and Mason 1984; Lewin and Stephens 1994) and

(b) the process of making strategic decisions (Hart and Banbury 1994; Lu and Heard 1995;

Rajagopalan et al. 1993). Since Hambrick and Mason’s (1984) influential paper on “upper

echelons”, much emphasis has been placed on the role and significance of top management (i.e.

the CEO and/or top management team). This research stream has mainly focused on the

influence of top management on: (i) corporate strategies (Miller and Toulouse 1986;

Finkelstein and Hambrick 1990), (ii) innovation (Bantel and Jackson 1989), (iii) performance

(Haleblian and Finkelstein 1993; Norburn and Birley 1988; Eisenhardt and Schoonhoven 1990;

Smith et al. 1994), (iv) organisational structure (Miller and Droge 1986), and (v) planning

formality (Bantel 1993).

There has been little empirical work on the link between these two themes, ie top

management (TM) and the process of making SDs. As Rajagopalan et al. (1993, pp 364) stress

in a recent review: "research relating organisational factors such as .... top management team

(TMT) characteristics to strategic decision processes is limited". Others have argued along

similar lines (Bantel 1993; Huff and Reger 1987; Lewin and Stephens 1994; Smith et al. 1994).

Moreover, as we discuss shortly, the few studies which have been done on the links between

TM characteristics and SDM processes have produced mixed results. The influence of TM

therefore remains unclear. If upper echelons theory is to advance our knowledge of the role of

the CEO and the TMT we need a better understanding of their impact (if any) on SDM

processes and the underlying characteristics which are important (Smith et al. 1994).

The study reported here aims to clarify some important aspects of this influence. The main

question it explores is: “Does the CEO and/or the TMT influence the making of actual SDs,

and if so is it the CEO or the TMT which has most influence on the process?”. A secondary

1
question is: “Are there specific aspects of the process which are influenced by the CEO, the

TMT or both?”. To answer these questions the study focuses on selected characteristics of the

TMT (competitive aggressiveness, education) and the CEO (risk propensity, need for

achievement, education, tenure) as well as certain process characteristics (comprehensiveness,

formalisation, communication, politicisation).

The rest of this paper is organised as follows. In Section 2 we review the literature and

develop hypotheses. Section 3 describes our methods. Section 4 gives our results. Section 5

discusses the results and Section 6 explores their implications and limitations, and possible

directions for future research.

2. BACKGROUND AND HYPOTHESES

Three main perspectives attempt to explain organisational processes and outcomes:

"environmental determinism", "firm characteristics and resource availability", and "strategic

choice".

According to “environmental determinism”, SDs and processes are adaptations to external

opportunities, threats, constraints and other features of the environment. The role of TM is to

facilitate this adaptation (Lieberson and O'Connor 1972; Hannan and Freeman 1977).

The "firm characteristics and resource availability " perspective emphasises factors

internal to the firm such as its size, ownership, performance, and system resources. It is related

to the "inertial" perspective (Romanelli & Tushman 1986), according to which existing

organisational arrangements, structures, processes, and resources constrain SDs. Since

virtually all strategic initiatives require resources, a "resource perspective" may be added to

the determinants of SD processes (Pfeffer and Salancik 1978).

The "strategic choice" perspective emphasises the role of decision makers. It stresses that

strategic choices have an endogenous behavioural component and partly reflect the

2
idiosyncrasies of decision makers (Child 1972; Cyert and March 1963). A number of studies

extend this argument further, contending that the role of "upper echelons" or "top managers"

or "strategic leadership" is important enough to determine strategy content, process and

performance (Hambrick and Mason 1984; Miller and Toulouse 1986).

This latter perspective has attracted much theoretical and empirical attention. There is a

wealth of empirical research examining the relationship between TM and corporate

performance, innovation etc. (Bantel and Jackson 1989; Haleblian and Finkelstein 1993;

Norburn and Birley 1988; Eisenhardt and Schoonhoven 1990; Smith et al. 1994). Despite this,

there is, as already noted, very little positive evidence on TM influence on the process of

making SDs (Rajagopalan et al. 1993). On the contrary there is some evidence supporting the

opposite view. For example, Lyles and Mitroff (1980:117) reported that: "It is still not clear

what influence managerial characteristics have on the organisational problem-formulation

process. The results of the study indicate that these characteristics were not significant. This

might indicate that the problem-formulation process is at an organisational rather than an

individual level, in which case individual managers might not have a strong influence on the

process.....”.

The view that TM characteristics have little influence on decision-processes has been

supported by a number of researchers such as Lieberson and O'Connor (1972), Hannan and

Freeman (1977). Stein, in studying the SDM process, went so far as to conclude that

"leadership does not constitute a meaningful contextual domain influencing strategic

procedures" (Stein 1980: 332). This is a significant issue that needs to be resolved empirically.

The proponents of the strategic choice line of thought argue that TM influences performance,

strategy, innovation etc. by having a decisive impact on the process of making SDs. But if

empirically, there is no such impact, one is entitled to question the validity and relevance of

research on TM.

3
This paper sets out to investigate this issue. Despite the dearth of quantitative research on

the TM-SDM process relationship we do have foundations on which to build. The work of

Hambrick and Mason (1984), Miller et al. (1982) and Miller and Droge (1986) as well as many

others has shown how organisational strategies, structures etc. can be influenced by the

personalities of leaders. The popular press is replete with articles showing how leaders and

their teams have successfully turned their companies around. In the case of entrepreneurial

start-ups and small organisations, research has shown how CEOs are dominant in setting

direction (Miller and Droge 1986; Eisenhardt and Schoonhoven 1990).

Various TM characteristics have been proposed as important. These include both

personality and demographic characteristics of the CEO and of the TMT (Lewin and Stephens

1994; Miller and Toulouse 1986; Nahavandi and Malekzadeh 1993). Some researchers favour

demographic characteristics because of their objectivity and because they seem likely to

influence intervening processes (Finkelstein and Hambrick 1990; Hambrick and Mason 1984;

Hitt and Tyler 1991; Smith et al. 1994). Others argue that demographic characteristics, despite

their objectivity and measurability, are unlikely to influence SD processes (eg Haley and

Stumpf 1989; Miller et al. 1982). These authors view personality dimensions as better

predictors of decision-making behaviour, with some empirical support (eg Miller and Droge

1986). Our study included both personality and demographic characteristics, as we now

discuss.

Personality and Demographic Characteristics of the CEO

The most widely used CEO characteristics in the literature include: need for achievement

(nAch), risk propensity, tenure, and education.

i. Need for Achievement (nAch): nAch has been shown to have broad consequences for

behaviour (Miller and Droge 1986). CEOs with high nAch are dominated by a desire to

4
influence and control the context in which they operate. It has been argued that they exert this

influence through formal strategic planning, analytic rational decision making, and systems for

measurement, control and co-ordination (Miller and Toulouse 1986; Miller and Droge

1986).This would also tend to favour more formalised decision-making (Lewin and Stephens

1994), organisational specialisation, and formal co-ordination devices (Lawrence and Lorsch

1967; Miller and Toulouse 1986). CEOs with high nAch may also tend to centralise authority

into the hands of themselves or the TMT (Miller and Droge 1986). By emphasising formal

analysis, they may discourage politically driven decision-making.

The previous discussion suggests the following hypotheses:

H 1a to H 1c : The CEO's need for achievement will be positively related to (a) rationality

and negatively related to (b) hierarchical decentralisation and lateral communication, and (c)

politicisation.

ii. Risk Propensity: Risk propensity describes an individual’s attitude toward risk. It is

considered to be an important characteristic in predicting organisational processes and

outcomes (Gupta 1984; Nahavandi and Malekzadeh 1993). Taylor and Dunnette (1974)

reported that high risk propensity was typical of people who made rapid decisions. Extending

this to organisational decision-making we may hypothesise that risk taking CEOs may

influence the process in the direction of faster, less rational decisions, be reluctant to delegate

decision-making authority and generally operate more by intuition than by rational analysis.

There is however, an opposite argument which posits that risk takers do not necessarily rely

on limited evidence. Taylor and Dunnette’s (1974) risk takers extracted as much value as

possible from their search for information. Lewin and Stephens (1994) argue that CEOs with

low risk propensity will tend to implement centralised organisation designs characterised by

high control intensity and direct supervision in order to minimise uncertainty. This suggests

5
that risk prone CEOs will follow decentralised configurations in decision-making and less rule

formalization.

Due to the inconclusiveness of the available research, the following hypotheses are only

tentative.

H 2a to H 2d: The CEO’s risk propensity will be negatively related to (a) rationality, (b)

rule formalisation and (c) politicisation. They will be positively related to (d) decentralisation

and lateral communication.

iii. Tenure (in the CEO position): Tenure has been reported to influence organisational

processes and outcomes (Finkelstein and Hambrick 1990). Based on the “socialisation”

argument of Thompson (1967) and Tushman and Romanelli (1985), we can argue that the

longer executives stay with a company the more likely they are to be inculcated in its culture.

This longevity fosters a shared understanding, a reliance on 'true and tried' decision practices

(Cyert and March 1963; Katz 1982), a higher commitment to the status quo and a reluctance

to change (Staw and Ross 1980).

The CEO's tenure may influence the communication patterns, favouring standardised ways

of communication (Katz 1982; Smith et al. 1994; Wiersema and Bantel 1992). Over time,

TMT members become adept at getting, sharing and discussing information (Zenger and

Lawrence 1989). Moreover, based on the theory of CEO discretion (Finkelstein and Hambrick

1990; Haleblian and Finkelstein 1993), we may hypothesise that through the years she/he will

try to form a TMT of her/his choice thus minimising political debates.

The danger of such socialisation is that, at least beyond a certain point, social integration

may lead to “groupthink” (Janis 1972, Tushman and Romanelli 1985). Unless the TMT is

extremely efficient, management tenure may be related to more biased, less rational and less

formalised SDM processes and restricted information processing (Bantel 1993; Katz 1982;

6
Schwenk 1993). Indeed, tenure has been assumed to limit the perspectives of executives. As

Hambrick and Mason (1984: 200) contend: “executives who have spent their entire careers in

one organisation can be assumed to have relatively limited perspectives. In extreme cases

where the entire top management team has risen solely through the organisation, it is likely

that it will have a very restricted knowledge base from which to conduct its limited search".

Miller (1991) found that firms with long-tenured CEOs were less likely to have produced

strategies and structures which successfully matched changed/new environmental requirements.

It is also possible that through the years the dominant coalition enlarges and incorporates more

decision makers from various functions, thus resulting in greater hierarchical decentralisation

and lateral communication, at least among departmental heads.

Conversely, Fredrickson and Iaquinto’s (1989) study of two industries, supported the

opposite line of argument. They found that change in executive team tenure as well as the level

of TMT's continuity were positively related to change in comprehensiveness in SDM. These

results seriously questioned the applicability of various theories of organisational socialisation

(Thompson 1967) and group decision-making (Janis 1972) in the context of SDM, suggesting

that these theories have to be refined and reconceptualised before they can be applied at the

strategic apex.

The above discussion suggests the following hypotheses:

H 3a to H 3c: The CEO's tenure will be positively related to (a) rationality and (b)

hierarchical decentralisation and lateral communication. It will be negatively related to (c)

politicisation.

iv. CEO Education Level: Although education level has been explored in the past as a

possible influence on organisational performance, innovation, and receptivity to new ideas

(Keller and Holland 1978; Hambrick and Mason 1984; Bantel and Jackson 1989), only a

7
handful of studies have examined its impact on SDM processes (Bantel 1993; Hitt and Tyler

1991).

Hambrick and Mason (1984) argued that the main impact of a well-educated CEO may be
1
indirect, by encouraging the appointment of educated managers in other senior positions .

Education level has been found to be related to the extent of people’s information search

and analysis (Dollinger 1984). A highly-educated CEO is thus likely to demand more detailed

information, leading to more rational-comprehensive SDM (Bantel 1993; O’Reilly 1982). This

suggests that education might also be associated with more financial reporting, more co-

ordination devices, and perhaps more participation. Extending this argument, one might expect

well educated CEOs to be more powerful, thus minimising political behaviour. However, Nutt

(1986) found that executive education level had only a modest effect on decision-making, by

lowering the perception of risk and enhancing the project adoption rate. Thus, the following

hypotheses should be seen as only tentative:

H 4a to H 4c: CEO level of education will be positively related to (a) rationality, (b) formal

co-ordination devices, and (c) hierarchical decentralisation and lateral communication.

Characteristics of the TMT

Finally, it may be that rather than (or in addition to) the characteristics of the CEO, the

characteristics of the members of the TMT may be an important influence on SDM. We here

focus on two variables: the TMT’s education level and its perceived competitive

aggressiveness.

i. TMT’s Level of Education: The same arguments and hypotheses can be advanced for the

education level of the TMT as for the CEO. If anything, we expect the relationships to be

stronger since a team of well educated managers should be oriented toward organising and

1
Our data support this argument by revealing a statistically significant relationship between the CEO’s
education level and the percentage of university graduates in the TMT (P=0.17 s.s. 0.10
8
rationalising (Hambrick and Mason 1984) and show an inclination toward innovativeness and

strategic change (Wiersema and Bantel 1992).

A well-educated TMT should be a professional team which again should influence the

"administrative complexity and sophistication (thoroughness of formal planning systems,

complexity of structures, co-ordination devices, budgeting detail) of firms" (Hambrick and

Mason 1984: 201). Moreover, well-educated managers have been conjectured to show higher

levels of knowledge and ability to perform better, thus contributing to more rational

approaches to decision-making and more creative solutions to complex problems (Bantel and

Jackson 1989).

Finally, a TMT consisting of well-educated managers may be efficient enough to reach an

objectively better solution, thus minimising political processes. This argument has recently

received empirical support from Michel and Hambrick (1992), who found that TMT

homogeneity (eg in education) was related to consensus in the making of strategy.

H 5a to H 5c: The TMT’s education level will be positively related to (a) rationality (b)

hierarchical decentralisation and lateral communication, and negatively related to (c)

politicisation.

ii. Aggressiveness of the TMT: For commercial firms operating in competitive product

markets, all SDs are ultimately aimed at providing long-term competitive advantage (Porter

1985). In broad terms, we would therefore expect the TMT’s competitive aggressiveness - the

extent to which it aims to beat the competition - to influence the energy, thoroughness and

other characteristics of SDM.

Specifically, following Stein (1980), we hypothesise that an aggressive TMT will be more

rational in the sense of doing fuller and more explicit analysis of alternative courses of action.

Such analysis is likely to involve the use of specialist information from middle managers and

9
technical staff at lower levels and across functions. This implies a need for hierarchical

decentralisation and lateral communication, and for some type of formal structure to aid

decision-making. We also expect a TMT which is focused on beating the competition to seek

to avoid political infighting. Formally, this gives us the following hypotheses:

H 6a to H 6d: TMT aggressiveness will be positively related to (a) rationality, (b)

hierarchical decentralisation and lateral communication and (c) a formal decision process. It

will be negatively related to (d) politicisation.

Is it the CEO or the TMT that really matters?

The above arguments suggest that both the CEO and the TMT may influence SDM. But

which really matters? We have little empirical evidence. Gupta (1988) suggested that a

stronger relationship with strategy will be found if TMTs, rather than individual managers or

CEOs, are analysed. Other findings similarly suggest that TMT characteristics may outweigh

CEO characteristics in predicting organisational processes, innovativeness, performance etc.

(eg Bantel and Jackson 1989; Murray 1989).

Control Variables

Furthermore theory suggests that the influence of CEO or TMT characteristics on SDM is

likely to be contingent on a number of situational factors (Nahavandi and Malekzadeh 1993).

For instance, we might expect the intensity of our hypothesised relationships, i.e. the degree to

which the CEO or the TMT is able to affect decision processes, to be contingent on the CEO’s

power and his/her discretion-latitude to influence the destiny of the organisation (Hambrick

1989; Lewin and Stephens 1994). Latitude is seen as a function of both internal and external

contextual factors such as environmental hostility, industry competitiveness, firm size etc.

(Lewin and Stephens 1994; Miller and Toulouse 1986; Damanpour 1992).

10
Two variables related to the managerial discretion of the CEO are frequently used: the

hostility of the environment and the size of the firm. Hostile environments limit managerial

discretion. Conversely a favourable environment provides the firm with slack (Cyert and March

1963) allowing more latitude to manoeuvre (Lewin and Stephens 1994).

The size of the firm is negatively related to the CEO’s and any other individual’s ability to

influence decision-making. The larger the organisation the larger the inertia which tends to

reduce managers ability to effect change (Hambrick and Finkelstein 1987; Nahavandi and

Malekzadeh 1993). In smaller firms, the power of the CEO is greater because there are fewer

managers (and it becomes easier to control information and decision-making and to directly

influence subordinates through face to face contact) and in some cases the CEO has a share of

the ownership. TM characteristics may matter less in large organisations due to the more

decentralised and formal nature of decision-making (Kets de Vries and Miller 1986; Nahavandi

and Malekzadeh 1993). Overall, we would expect a negative relationship between size and the

leader's degree of discretion.

Fredrickson and Iaquinto (1989) reported that larger size is associated with more

comprehensive SDM. Child (1972) also suggested that size affects the framework of

organisational decision-making. Overall, it is argued that there is an inverse relationship

between size and the impact of the CEO on the organisation. However, it is worth mentioning

that Dean and Sharfman (1993) as well as the Bradford studies (eg Hickson et al. 1986) found

no differences in SDM processes which could be attributed to size.

Finally, whether a company is an independent business or part of a broader group of

companies may have an impact on the ability of the TM to influence the process of making

SDs.

In summary, the influence of the characteristics of the TM on SDM processes may depend

on contextual factors such environment, firm size, and whether the company is independent or

11
an SBU. These control variables are included in our analysis.

Figure 1 presents an integrative model of the CEO and TMT influence on the SDM process

based on the above discussion. It argues that both the CEO and the TMT affect the process. It

also takes into account the possible impact of corporate environment, size and corporate

control type as factors limiting TM discretion on SDs.

Insert Figure 1 about here

3. METHODS

Data

Unit of analysis: The study focuses on individual SDs as the unit of analysis. Most SDs

involve the allocation of resources: both existing resources (which have an opportunity cost)

and incremental resources (which involve capital investment). To keep the unit of analysis clear

and reasonably comparable across cases, we have limited our sample to strategic investment

decisions (SIDs), i.e. SDs which involve significant capital investment and therefore require

some degree of explicit appraisal and authorisation (Marsh et al. 1988).

Data Collection: The study can be characterised as “multi-method, in-depth field research”

(Snow and Thomas 1994). The data were collected as follows: (i) initial CEO interview, (ii)

semi-structured interviews with key participants, (iii) completion of two questionnaires: one

general for the CEO and one decision-specific for the key participants, and (iv) supplementary

data from archival sources (eg internal documents, reports, minutes of meetings).

The research covers 70 SIDs in 38 manufacturing firms in Greece. The SIDs were identified

at the initial CEO interview. The CEO was asked to complete the first, general, questionnaire

providing information about the company, its environment, and its organisation. He (all the

CEOs were men), was then asked to name the two most important investment decisions which

had taken place in the last 2-3 years. In our attempt to minimise distortion and memory failure
12
problems, we asked for recent decisions. The vast majority of the decisions were taken less

than 6 months prior to our interview.

He was asked to give a brief description of each decision and the process followed in

making it, and to name all the key participants as well as the manager with the most intimate

knowledge of the process, eg the project champion (This methodology follows that of

Hickson et al. 1986). In most cases, we had access to the paper trail documenting the decision

and its process, before interviewing the designated manager: investment decisions tend to be

better documented than other SDs (Marsh et al. 1988). This aided our understanding and

helped us in checking managers for possible memory failure and ex-post rationalisation (Huber

and Power 1985).

Semi-structured interviews were conducted with the most knowledgeable manager (Huber

and Power 1985). We followed a "funnel sequence" whereby the interview started with a semi-

structured discussion using open-ended questions (Bouchard 1976). Interviewees were then

handed the second decision-specific questionnaire designed to measure the dimensions of the

SDM process. Their responses were checked against the initial CEO interview and the paper

trail. If the answers differed from what these other sources suggested, we were able to

question the manager’s recollections. A thorough discussion followed and the manager usually

justified his/her point of view.

Where interviewees felt they had insufficient information (eg a production manager could

not reliably recall aspects of the financial evaluation or the marketing issues), we conducted

further interviews with the relevant informants (eg finance or marketing director) to clarify

these specific points. Their responses on these specific points were used as better

approximating reality. These incidents were rare because we selected people who had actively

participated in the process and had a thorough understanding of what actually happened. Six

decisions out of the 70 used this hybrid multiple-informant approach.

13
Sample: The sampling frame comprised all manufacturing enterprises in Greece with more

than 300 employees, drawn from three industrial sectors (food, chemicals and textiles), a total

population of 89 companies of which 38 participated in the survey. In most cases, two SIDs

were studied in each firm, resulting in a sample of 70 SIDs. The response rate achieved

(approximately 43%) is extremely high considering the intrusive nature of the research and the

fact that top management was asked to devote several hours of its time. Comparison between

respondent and non-respondent firms on the basis of three objective measures (number of

employees, total assets, and return on assets), verified the representativeness of the final

sample.

Reliability and Validity: A study based on participant recall, though the dominant method

of studying SDM processes, has inherent limitations (Bouchard 1976; Huber and Power 1985;

Kumar et al. 1993). A number of procedures have been suggested to help reduce their impact,

including the use of multiple informants (Kumar et al. 1993). Despite this, even these

methodologies do not guarantee objectivity. The nature of our research (in-depth study of two

SIDs in each company, a separate CEO interview, use of archival data), the idiosyncrasies of

our sample (i.e. medium-sized enterprises, existence of few key-informants in each SD), as well

as the enormous amount of effort to obtain even a single informant to discuss in depth often

delicate matters, like SDs, precluded us from using more than one informant per SID and

aggregating their responses.

Nevertheless, we followed several tactics in our attempt to alleviate possible biases

(Bourgeois and Eisenhardt 1988; Huber and Power 1985; Kumar et al. 1993), First, archival

records documenting the process and its characteristics were collected prior to our main

interview. Second, particular caution was exercised to minimise distortion and memory failure

problems. This was attempted by selecting recently taken decisions (Mintzberg et al. 1976), by

interviewing only major participants (Kumar et al. 1993), by adopting a "funnel sequence"

14
method in conducting interviews (Bouchard 1976), by cross-checking interview data against

other managers recollections (eg CEOs) and other sources, and by using additional informants

in cases of incomplete information. Finally, the willingness and sincerity with which top

managers participated in the research and the interest they showed during the interviewing

process, provide a sufficient reason to believe in the face validity of their responses.

Measurement of TM Characteristics

CEO Personality characteristics: Two CEO personality characteristics were measured:

nAch, and risk propensity. To measure nAch we used Steers and Braunstein's (1976)

instrument, which has been shown to exhibit acceptable levels of discriminant, predictive, and

convergent validity, as well as reasonably high levels of test-retest reliability and internal

consistency. Six seven-point Likert-type scales were used with options ranging from (1) never

to (7) always. The response format reflects an active attitude towards decision-making and

personal goal setting. The scale provided an Alpha coefficient of 0.70, comparable to that in

other studies (eg Steers and Braunstein 1976; Begley and Boyd 1986).

Risk propensity was measured with fifteen five-point scales employing a disagreement/

agreement format. They were drawn from the Jackson's Personality Inventory (1977) and from

Eysenck and Eysenck (1965). Particular care was exercised to select items approximating the

reality of business situations and represent what Jackson et al. (1972) call 'monetary risk'. The

Alpha reliability coefficient for the resulting construct is 0.73, marginally lower than reported

by Jackson (1977) and Begley and Boyd (1986).

CEO Demographic Characteristics: We used two CEO demographic measures: (i)

“Tenure”, defined as length of service in the same position (in years) and (ii) level of

education (on a five-point scale).

TMT Characteristics: Two measures were used. The first, measures the degree of

15
aggressiveness of what Hage and Dewar (1973) call the 'behavioural elite group' (i.e. the CEO

and all those participating in major decisions). It draws from Khandwalla (1977), and Stein

(1980) and is measured by three items expressing dimensions of the TMT’s attitude towards

risk and achievement. The first item measures the degree of 'beat-the-competition’ attitude, the

second TMT’s risk propensity (i.e. attitude towards risky projects), and the third the top team's

attitude to innovation. When factor analysed the three items provided one factor explaining

62% of total variance. The combination of these three items is explained as TMT’s

aggressiveness towards competitors, innovation, and risky projects. The reliability of the

resulting three-item scale (Alpha=.70), is satisfactory (Van De Ven and Ferry 1979).

The second variable attempts to capture the level of education of what Hage and Dewar

(1973) name as formal elite. It is an objective variable measuring the percentage of managers,

down to the level of departmental heads, who are university graduates.

Measurement of Process Characteristics

Many SDM studies describe the process as a sequence of steps, phases or routes (eg

Fredrickson 1984; Mintzberg et al. 1976). Others focus on sets of decision characteristics or

aspects instead of a sequence of phases (eg Hickson et al. 1986; Lyles 1987; Stein 1980). It is

widely recognised that SDM is far from being a clear sequence of activities. Thus, instead of

using sequential, step-by-step models to describe decision-making, it may be better to identify

different dimensions of the process and to attach variables to them. A meaningful but

parsimonious categorisation of possible process dimensions was derived from the relevant

literature as follows:

• comprehensiveness/rationality: (Dean and Sharfman 1993; Lyles and Mitroff 1980).

Elements of rationality can be traced in many other studies eg degree of inquiry (Lyles

1987), or scrutiny (Cray et al. 1988),

16
• political/dynamics: This can be found as: politicality (Lyles 1987; Hickson et al. 1986),

and negotiation/ bargaining (Cray et al. 1988; Hickson et al. 1986),

• centralisation (Cray et al. 1988; Lyles 1987),

• formalization/standardisation of the process (eg Stein 1980),

• dynamic factors-disruption-impedance (Cray et al. 1988; Mintzberg et al. 1976),

• The following six process characteristics were measured: comprehensiveness/rationality,

existence of a set of formalised rules guiding the process, existence of formal co-ordination

devices, hierarchical decentralisation, lateral communication, and politicisation. These are

indicated in the Appendix along with their measurement details. Their Alpha coefficients are

presented in Table 1.

Ample theoretical support can be found for these dimensions (eg Camillus 1982; Cray et al.

1988). For example, the framework adopted is similar to that of Cray et al. (1988). Their

scrutiny dimension is captured by the comprehensiveness/ rationality and financial reporting

dimensions; the interaction dimension is captured by the politicisation and problem-solving

dissension dimensions; the centrality dimension is similar to our hierarchical decentralisation

and lateral communication dimensions.

Measurement of Control Variables

To measure environmental hostility we used Khandwalla's (1977) three five-point scales: the

degree of environmental riskiness, stressfulness and dominance over the company. The

resulting Alpha coefficient is satisfactory (.69). Size was measured by the log of full-time

employees (eg Fredrickson 1984). Finally control type was measured by a dummy variable

recording whether the company was an SBU or an independent company.

4. RESULTS

17
Table 1 presents the means, standard deviations and reliabilities for all variables assessed in

this study. A quick look at only the correlations between CEO and SDM process

characteristics reveals that only 4 out of the 24 relationships were statistically significant at a

level of 5% or less. This indicates virtually no relationship between the two groups of

variables. Closer inspection shows only one of the 12 relationships with CEO personality

measures (risk propensity with lateral communication) was significant. For the two CEO

demographic measures (tenure and education) the only significant correlations were that:

• both measures were significantly related to the existence of formal co-ordination devices,

• tenure was highly significantly related to hierarchical decentralisation.

Insert Table 1 about here

Conversely, for TMT characteristics seven out of the twelve possible relationships were

statistically significant at a 5% level. This is perhaps the most noteworthy finding in Table 1,

indicating the importance of the TMT as a whole, as opposed to the CEO, in the SDM

process.

To test this initial conclusion further, we ran a number of hierarchical regression models

treating the nine process characteristics as dependent variables and TM characteristics as

independent variables (Table 2). Hierarchical regression allows for an assessment of the

incremental increase in the explained variance of a dependent variable that is explained by the

successive addition of sets of independent variables where the variance explained by previously

entered variables is partialled out (Cohen and Cohen 1983). Independent variables were

introduced in four blocks. First, the control variables were introduced. The CEO personality

and demographic characteristics followed in steps 2 and 3 respectively. Finally in step 4 the

TMT characteristics were introduced. Model F-tests of significance (Cohen and Cohen 1983)

were used to assess the changes in R2 resulting from the addition of each new set of predictors.

18
A significant change in R2 for step 2 (CEO personality characteristics) for example, would

indicate that these characteristics significantly influence the specific process dimension. A

significant change in R2 for step 3 (CEO demographic characteristics) would demonstrate the

separate influence of these additional CEO characteristics on the specific process dimension, ie

that CEO demography adds significantly to the explained variance after the control and

personality characteristics are entered.

Insert Table 2 about here

5. DISCUSSION OF RESULTS

CEO and TMT Variables

The results in table 2 suggest that both the CEO and the TMT bear on the process of

making SDs. Interestingly they seem to influence different dimensions of the process: CEO

characteristics are significantly and positively related to the existence of formal co-ordination

devices and to the degree of hierarchical decentralisation. TMT characteristics relate more to

comprehensiveness/ rationality, rule formalisation, hierarchical decentralisation, and lateral

communication. As in previous studies the characteristics of the TMT had more overall

influence on the SDM process than did those of the CEO (despite the fact that we measured

only two of the former versus four of the latter).

Based on the full model, a number of relationships raise some issues that bear further

discussion. The CEO’s need for achievement provides one significant relationship. This

supports the view that achievers may centralise decision-making and resort in less hierarchical

decentralisation. The characteristic of risk propensity has little influence on the SDM

processes. It only provides one significant relationship with rule formalization. This verifies our

hypothesis that risk prone CEOs resort in less formalization in making SDs. All other potential

19
relationships are insignificant.

CEO’s tenure appears as the most influential CEO characteristic. First, it is strongly related

to the existence of more formal co-ordination devices. This is in line with what Katz (1982)

argues about the relationship of tenure with standardised ways of communication. Secondly, it

is positively related to hierarchical decentralisation and lateral communication. This is in line

with the argument that CEO's tenure has a positive impact on communication patterns (Smith

et al. 1994). Finally, results also indicate that tenure is positively related to comprehensiveness

in SD-making. This result supports the view that tenure may result in a common vocabulary

among managers, in greater levels of social integration and in better norms in getting and

sharing information. Finally, the CEO’s level of education provides only one strong positive

relationship with formal co-ordination devices. This is in line previous argumentation (e.g.

Hambrick and Mason 1984).

The TMT's level of education results in some interesting relationships. First, the percentage

of university graduates in TM appears to be related to rationality and rule formalization (eg

Hambrick and Mason 1984; Wiersema and Bantel 1992; Bantel and Jackson 1989). Second,

TMT's education level is positively related to more politicisation during SDM process. This is

contrary to our hypothesis. A plausible explanation could be offered if we consider that the

existence of many well educated executives may represent multiple sources of power and

expertise. Thus, we might expect well educated individuals to heavily bear on the process of

SDM in an attempt to skew the process in their preferred direction, thus causing politicisation.

Finally, TMT’s competitive aggressiveness appears to be the single most powerful predictor

of SDM processes. As hypothesised, competitive aggressiveness of the TMT is positively

related to rationality, rule formalization, as well as hierarchical decentralisation and lateral

communication. This is interesting since, to the best of our knowledge, such a characteristic of

the TMT has not been used by relevant research examining the significant attributes of the

20
TMT.

Control Variables

Size, is found to be insignificant in almost all regression models except rationality. This lack

of significance may be due to the fact that our sample is rather homogeneous in terms of size.

The emerged positive relationship with rationality is in line with conventional wisdom that

larger companies tend to have more rationalistic decision-making (eg Mintzberg 1976).

It is somewhat surprising, however, to find that environmental hostility as a control variable

had little influence on the process of making SDs. Only one weak positive correlation was

established with hierarchical decentralisation. This, at first appears counterintuitive since a

consequence of environments perceived as extremely hostile may be a tighter centralisation in

decision-making and a restrained flow of information between various layers, thus leading to

hierarchical centralisation (Child 1972).

Our explanation is that the relationship between hostility and decentralisation is curvilinear.

Thus, under environments which are characterised as moderately hostile we may observe

decentralisation. The descriptive statistics of the variable environmental hostility indicate a

mean of 2.9 which implies rather moderately hostile environments, on the average (Table 1).

Under such environmental situations (volatile, uncertain but not very hostile), authority has to

be delegated to people close to markets and technological developments i.e. decision making is

decentralised. These people are sources of vital information, and a centralised decision-making

structure would deprive top management of extremely useful data.

Also very significant is the impact of control type on several aspects of strategic DMPs.

Indeed, SBUs had more comprehensiveness/rationality, rule formalisation and co-ordination

devices. On the other hand they experience more politicisation in their decision-making

processes. These results are in line with the view that as strategic decisions in SBUs are usually

21
subject to review or influence by outsiders they will take pains to demonstrate that they act

rationally and to justify their major decisions both inside and outside the company (Dean and

Sharfman 1993; Romanelli and Tushman 1986). The positive statistically significant association

between politicisation and SBUs may be attributed to the fact that numerous parties, not only

from inside but also from he outside of the company, may intervene and try to skew the output

of the decision process in their preferred direction. Such an activity may raise politicisation.

6. IMPLICATIONS-LIMITATIONS-FUTURE RESEARCH

This paper examines the extent to which certain characteristics of the CEO and the TMT

are related to specific strategic decision-making behaviour. According to Gupta (1984), the

crucial question is not whether managers matter but how much they matter. The results of this

study support the view that both CEOs and TMTs influence the process of making SDs.

Focusing on just CEOs we have found that it is not their personality but their demographic

characteristics (tenure and education) which matter more. For example, both education and

tenure favour the formation of co-ordination devices, while tenure also influences

decentralisation and communication patterns.

Personality characteristics were rather weak predictors of SDM processes. Our most

significant finding was that risk prone CEOs tended to abandon rule formalization during the

SDM process. But why is there so little relationship between CEO personality characteristics

and SDM processes? A number of previous studies reviewed in the literature section, led us to

predict relationships. The psychological variables used are ones that recur in the literature. Our

results do not support these studies. One possible explanation is that our sample is comprised

of rather mature, medium-sized and larger firms, and that in this context the personality

characteristics of the CEO may not affect the SDM process.

Interestingly TMT characteristics were much better predictors of SDM behaviour. Given

22
that the data were collected from companies operating in Greece, this result is rather

surprising. Conventional wisdom as well as recent empirical evidence (eg Bourantas et al.

1990; Koufopoulos and Morgan 1994), holds that the management style of Greek companies

tends to be rather centralised, dominated by one individual. The lack of CEO dominance over

decision-making in our results may be because our sample was of medium-sized and larger

organisations, where we can assume that CEOs and other influential actors have less freedom.

In larger organisations power and influence may escape from the hands of a single

organisational actor and may be shared by the whole TMT.

Another possible explanation is that Greek companies have been put under intense

competitive pressure during the last decade. Thus, in order to survive and achieve long term

viability, they were forced to introduce changes including a more team-based style of decision

making.

On the other hand, the strong relationships between TMT characteristics and SD processes

suggest various explanations. First, results strongly support the “upper echelons” perspective

(Hambrick and Mason 1984; Hambrick 1988), proposing that the characteristics of the elite

inner circle are more important than those of the CEO or any other individual manager in

predicting SDM processes. Indeed, our data suggest that even in countries like Greece, where

one expects to find dominant individuals, and in medium-sized rather than very large

companies, it is the TMT that matters more. Similar conclusions were reached in the US

context by Gupta (1988); Bantel and Jackson (1989) and Murray (1989).

But still the CEO does have an impact on significant aspects of the process (i.e.

decentralisation, co-ordination). This may carry important implications for future research

since so far work in the area has been divided into two groups: one studying CEOs and another

studying TMTs. We believe that future research on TM should adopt a more balanced

approach studying both TMT characteristics and CEO characteristics. Our results suggest that

23
when studied together they provide a more reliable view of how SDM processes evolve within

the company.

In addition, the results of this study question a part of the literature (eg Lieberson and

O'Connor 1972; Hannan and Freeman 1977; Lyles and Mitroff 1980; Stein 1980), which

contends that leadership variables have little role in explaining actual decision behaviour. In

particular, the aggressiveness of the TMT, its level of education as well as CEO tenure and

level of education were each significantly correlated with specific process characteristics.

Finally, several limitations of the study warrant discussion. First is its cross-sectional,

retrospective nature. Second, the companies in our sample represent approximately 40% of the

population of medium-sized and larger industrial enterprises in the food, textiles and chemical

sectors in Greece. Thus, results are representative of these specific types of company and are

not necessarily generalisable in other sectors and countries. In smaller or significantly larger

enterprises we might expect different results.

Despite these limitations, some implications for practice are offered. CEOs wishing to

influence SDs cannot rely solely on their hierarchical position, since the data suggest that

SDM is more a team effort than a one man show. A possible implication is that CEOs should

mainly focus on building a strong aggressive TMT.

A potential strong point of the research relates to the fact that it corroborates relevant

research while bringing new empirical evidence from a context outside the USA, UK and

Canada. Since the vast majority of published research in strategic decision-making has taken

place in these countries, it seems important that the paper provides quantitative evidence from

another EU country.

Concluding this paper we would like to point out some avenues for future research. First,

taking into account the lack of large-scale empirical research examining strategic leadership

and SDM processes, further examination of these relationships offers a potentially fruitful

24
direction for future research. Second, it should also be noted that this paper has focused on

only a few personality and demographic characteristics. The use of a different set of TM

characteristics (eg functional specialisation, heterogeneity etc.) to verify our results merits

further work.

25
REFERENCES
Bantel, Karen A.
1993 "Top Team, Environment and Performance Effects on Strategic Planning Formality". Group
and Organization Management 18/4: 436-458

Bantel, Karen A., and Susan E. Jackson


“Top Management and Innovation in Banking: Does the Composition of the Top Team make a
1989 Difference?". Strategic Management Journal 10: 107-124

Begley, Thomas M., and David P. Boyd


"Psychological Characteristics Associated with Entrepreneurial Performance" in Frontiers of
1986 Entrepreneurship, 146-165. Babson College, MA

Bourantas, Dimitris, John Anagnostelis, Yorgos Mantes and A.G. Kefalas


“Culture Gap in Greek Management”. Organization Studies 1/2: 261-283
1990

Bourgeois, L.J. III, and Kathleen M. Eisenhardt


"Strategic Decision Processes in High Velocity Environments: Four Cases in the Microcomputer
1988 Industry", Management Science 34/7:816-835.

Camillus, John C.
"Reconciling Logical Incrementalism and Synoptic Formalism-An Integrated Approach to
1982 Designing Strategic Planning Processes". Strategic Management Journal 3:277-283

Child, John
"Organizational Structure, Environment and Performance: The Role of Strategic
1972 Choice".Sociology 6: 1-22.

Cohen, J., and P. Cohen


1983 Applied Multiple Regression/Correlation Analysis for the Behavioral Sciences. (2nd ed.)
Hillsdale, NJ: Lawrence Erlbaum

Cray, David, Geoffrey R. Mallory, Richard J. Butler, David J. Hickson and David C. Wilson
"Sporadic, Fluid and Constricted Processes: Three types of Strategic Decision-making in
1988 Organizations", Journal of Management Studies 25/1: 13-39

Cyert, Richard M., and James G. March


A Behavioral Theory of the Firm. Englewood Cliffs, NJ: Prentice-Hall.
1963

Damanpour, Fariborz
“Organizational Size and Innovation’. Organization Studies 13/3: 375-402
1992

Dean, James W. Jr. and Mark P. Sharfman


"Procedural Rationality in the Strategic Decision-making Process". Journal of Management
1993 Studies, 30/3: 587-610

Dollinger, Marc
"Environmental Boundary Spanning and Information Processing Effects on Organizational
1984 Performance". Academy of Management Journal 27: 351-368.

Eisenhardt, Kathleen M. and Claudia B. Schoonhoven


“Organizational Growth: Linking foundingTeam, Strategy, Environment, and Growth among
1990 U.S. Semiconductor Ventures, 1978-1988". Administrative Science Quarterly 33: 504-529.

26
Eysenck, H.J., and S.B.G. Eysenck
The Eysenck Personality Inventory, London: University of London Press
1965

Finkelstein, Sydney, and Donald Hambrick


"Top Management Team Tenure and Organizational Outcomes: The Moderating Role of
1990 Managerial Discretion". Administrative Science Quarterly 35: 484-503.

Fredrickson, James W
"The Comprehensiveness of Strategic Decision Processes: Extension, Observations, Future
1984 Directions", Academy of Management Journal 27/3: 445-466.

Fredrickson, James W., and Anthony L., Iaquinto.


"Inertia and Creeping Rationality in Strategic Decision Processes". Academy of Management
1989 Journal 32/4: 516-542.

Gupta, Anil K.,


"Contingency Perspectives on Strategic Leadership: Current Knowledge and Future Research
1988 Direction", in The Executive Effect: Concepts and Methods for Studying Top Managers. D.C.
Hambrick (Ed.), 147-178. Greenwich, CT: JAI Press.

Gupta, Anil K.
"Contingency Linkages Between Strategy and General Manager Characteristics: A Conceptual
1984 Examination". Academy of Management Review 9/3: 399-412.

Hage, Jerald, and Robert Dewar


"Elite Values Versus Organizational Structure in Predicting Innovation". Administrative
1973 Science Quarterly 18/3: 279-290.

Haleblian, Jerayr, and Sydney Finkelstein


"Top Management Team Size, CEO Dominance, and Firm Performance: The Moderating Roles
1993 of Environmental Turbulence and Discretion". Academy of Management Journal 36/4: 844-
863.

Haley, Usha C.V., and Stephen A. Stumpf


"Cognitive Trails in Strategic Management Decision-Making: Linking Theories of Personalities
1989 and Cognitions". Journal of Management Studies 26/5: 477-497.

Hambrick, Donald C.,


"Putting Top Managers Back in the Strategy Picture". Strategic Management Journal 10,5-15.
1989

Hambrick, Donald C.
"The Top Management Team: Key to Strategic Success".California Management Review 88-
1988 107.

Hambrick, Donald C., and Phyllis Mason


“Upper Echelons: The Organization as a Reflection of its Top Managers". Academy of
1984 Management Review 9: 193-206.

Hannan, Michael T., and John H. Freeman


"The Population Ecology of Organizations". American Journal of Sociology 82:929-964.
1977

Hart,Stuart and Catherine Banbury


"How Strategy-Making Processes Can Make a Difference". Strategic Management Journal
1994 15,251-269.

27
Hickson, David J., Richard J. Butler, Davies Cray, Geoffrey R. Mallory, and David C. Wilson
Top Decisions: Strategic Decision-Making in Organizations. Oxford, Basil Blackwell.
1986

Hitt, Michael, and Beverly Tyler,


"Strategic Decision Models: Integrating Different Perspectives".Strategic Management Journal
1991 12:327-352

Huber, George P., Daniel J. Power


"Retrospective Reports of Strategic-Level Managers: Guidelines for Increasing Their Accuracy"
1985 Strategic Management Journal 6: 171-180.

Huff, Anne S., and Rhonda K. Reger


"A Review of Strategic Process Research". Journal of Management 13/2: 211-236.
1987

Jackson, Douglas N.
1977 "Reliability of the Jackson Personality Inventory", Psychological Reports 40, 613-614.

Jackson, Douglas N., L. Hourany, and N.J. Vidmar


"A Four-Dimensional Interpretation of Risk Taking". Journal of Personality 40: 483-501.
1972

Janis, Irving L.
1972 Victims of Groupthink. Boston, Houghton Mifflin.

Katz, Ralph
"The Effects of Group Longevity on Project Communication and Performance". Administrative
1982 Science Quarterly 27: 81-104.

Keller, Robert T., and Winford E Holland


“Individual Characteristics of Innovativeness and Communication in Research and Development
1978 Organizations". Journal of Applied Psychology 63/6: 759-762.

Kets De Vries, .F.R. Manfred, and Danny Miller


"Personality, Culture and Organization". Academy of Management Review 1: 266-279.
1986

Khan, Arshad M. and Manopichetwattana, Veerachai


"Innovative and Noninnovative Small Firms: Types and Characteristics". Management Science
1989 15/5: 597-606.

Khandwalla, Pradip N.
The Design of Organizations. New York, Harcourt, Brace, Jovanovich.
1977

Koufopoulos, Dimitrios N., and Neil A. Morgan


“Competitive Pressures Force Greek Entrepreneurs to Plan”. Long Range Planning 27/ 4:
1994 112-124.

Kumar, Nirmalya, Louis Stern, and James C. Anderson


“Conducting Interorganizational Research Using Key Informants”. Academy of Management
1993 Journal 36: 1633-1651.

Lawrence, Paul R., and Jay W., Lorsch


"Differentiation and Integration in Complex Organizations". Administrative Science Quarterly
1967 13: 1-47.

28
Lewin, Arie Y., and Carroll U. Stephens
"CEO Attributes as Determinants of Organization Design: An Integrated Model". Organization
1994 Studies 15/2: 183-212.

Lieberson, Stanley, and James F. O'Connor


"Leadership and Organizational Performance: A Study of Large Corporations". American
1972 Sociological Review 37:117-130.

Lyles, Marjorie A.
"Defining Strategic Problems: Subjective Criteria of Executives". Organization Studies 8/3:
1987 263-280.

Lyles, Marjorie A. and Ian I. Mitroff


"Organizational Problem Formulation: An Empirical Study". Administrative Science Quarterly
1980 25/1:102-119.

Lu Yuan, and Rachel Heard


“Socialized Economic Action: A Comparison of Strategic Investment Decisions in China and
1995 Britain”. Organization Studies 16/3: 395-424.

March, James G., and Herbert A. Simon


Organizations. New York, Wiley.
1958

Marsh, Paul, Patrick Barwise, Kathryn Thomas, and Robin Wensley


Managing Strategic Investment Decisions in Large Diversified Companies London Business
1988 School, Center for Business Strategy.

Michel, John, and Donald C. Hambrick,


Diversification Posture and Top Management Team Characteristics". The Academy of
1992 Management Journal 35/1: 9-37.

Miller, Danny
"Stale in the Saddle: CEO Tenure and the Match Between Organization and Environment".
1991 Management Science 37: 34-52.

Miller, Danny, and Cornelia Droge


"Psychological and Traditional Determinants of Stucture". Administrative Science Quarterly
1986 31: 539-560.

Miller, Danny. and Jean-Marie Toulouse


"Chief executive personality and corporate strategy and structure in small firms". Management
1986 Science 1389-1409.

Miller, Danny, Kets De Vries and Jean-Marie Toulouse


"Top Executive Locus of Control and its Relationship to Strategy Making, Structure and
1982 Environment". Academy of Managment Journal 25: 237-253.

Miller, Danny, and Peter H. Friesen


"Innovation in Conservative and Entrepreneurial Firms: Two Models of Strategic Momentum".
1982 Strategic Management Journal 3: 1-25.

Mintzberg, Henry, Duru Raisinghani, and Andre Theoret


"The Structure of the 'Unstructured' Decision Processes". Administrative Science Quarterly
1976 21:246-275.

29
Murray, Alan I.
"Top Management Group Heterogeneity and Firm Performance". Strategic Management
1989 Journal 10:125-141.

Nahavandi, Asfaneh, and Ali R. Malekzadeh


"Leader Style in Strategy and Organizational Performance: An Integrative Framework". Journal
1993 of Management Studies 30/3: 405-425.

Norburn, David, and Sue Birley


"The Top Management Team and Corporate Performance". Strategic Management Journal 9:
1988 225-237.

Nutt, Paul C.,


"Decision Style and Strategic Decisions of Top Executives". Technological Forecasting and
1986 Social Change 30: 3 -62.

O'Reilly, Charles A. III, David F. Caldwell, and William P. Barnett


"Work Group Demography, Social Integration and Turnover". Administrative Science
1989 Quarterly 34:21-37.

O'Reilly, Charles A.
"Variations in Decision Makers' Use of Information Sources: The Impact of Quality and
1982 Accessibility of Information". Academy of Management Journal 25/ 4: 756-771.

Pfeffer, Jeffrey
1 “Organizational Demography”. In Research in Organizational Behavior, L.L. Cummings and
983 B. M. Staw (eds.), 5, 299-357.Greenwich, CT: JAI Press.

Pfeffer, Jeffrey, and Gerald R. Salancik


The External Control of Organizations: A Resource Dependence Perspective. London: Harper
1978 and Row.

Phillips, Steven L., Susan .A. Hellweg, and Stuart L. Tubbs


"Employee Network Propensity as a Function of Perceived Job Satisfaction, Ambiquity
1983 Tolerance and Locus of Control", Proceedings of the Academy of Management, 209-214.

Porter, Michael
Competitive Advantage. London: Free Press.
1985

Rajagopalan, Nandini, Abdul M. A. Rasheed, and Deepak K. Datta


"Strategic Decision Processes: Critical Review and Future Directions". Journal of Management
1993 19/2:349-384.

Romanelli, Elaine, and Michael Tushman


"Inertia, Environments and Strategic Choice: A Quasi-Experimental Design for Comparative-
1986 Longitudinal Research". Management Science 32: 608-621.

Schneider, Susan C., and Arnoud De Meyer


"Interpreting and Responding to Strategic Issues: The Impact of National Culture". Strategic
1991 Management Journal 12/4: 307-320.

Schwenk,Charles
"Management Tenure and Explanations for Success and Failure". Omega, Inernational Journal
1993 of Management Science 21/4: 449-456.

30
Smith, Ken G., Ken A. Smith, Judy D. Olian, Henry P. Sims, Jr., D.P. O’Bannon, and John A. Scully
“Top Management Team Demography and Process: The Role of Social Integration and
1994 Communication”. Administrative Science Quartely 39: 412-438.

Snow Charles C. and James B. Thomas


“Field Research Methods in Strategic Management: Contribution to Theory Building and
1994 Testing”. Journal of Management Studies 31/4: 457-479.

Staw, Barry, and Jerry Ross


"Commitment in an Experimenting Society: A Study of the Attribution of Leadership from
1980 Administrative Scenarios". Journal of Applied Psychology 65: 249-260.

Steers, Richard M., and D.N. Braunstein


"A Behaviorally-Based Measure of Manifest Needs in Work Settings". Journal of Vocational
1976 Behavior 9: 251-266.

Stein, Jorge
“Contextual Influence on Strategic Decision Methods” Unpublished PhD Dissertation,
1980 University of Pennsylvania.

Taylor, Ronald N.
"Perception of Problem Constraints". Management Science 22/1: 22-29.
1975

Taylor, Ronald N., and Marvin D. Dunnette


"Relative Contribution of Decision-Maker Attributes to Decision Processes". Organizational
1974 Behavior and Human Performance 12: 286-298.

Thompson, James D.
Organizations in Action. New York: McGraw-Hill
1967

Tushman, Michael, and Elaine Romanelli


"Organizational Evolution: A Metamorphosis model of Convergence and Reorientation". In
1985 Research in Organizational Behavior. Cummings, L.L. and B. Staw (Eds.) 7,171-9222.
Greenwich, CT: JAI Press.

Van de Ven, Andrew, and D. L. Ferry


Measuring and Assessing Organizations. London, Wiley.
1979

Wiersema, Margarethe F., and Bantel, Karen A


"Top Management Team Demography and Corporate Strategy Change". Academy of
1992 Management Journal 35/1: 91-121.

Zenger, Todd R., and Barbara S. Lawrence


199 "Organizational Demography: The Differential Effects of Age and Tenure distributions on
Technical Communication". Academy of Management Journal 32: 353-376.

31
ENVIRONMENT

• Hostility

CEO
CHARACTERISTICS

Personality
• Need for Achievement
• Risk Propensity SD PROCESS
CHARACTERISTICS
Demographics
• Tenure • Comprehensiveness/Rationality
• Education • Formalisation
• Co-ordination Devices
• Hierarchical Decenralisation
• Lateral Communication
• Politicisation
TMT
CHARACTERISTICS

• Education
• Competitive
Aggressiveness

OTHER
CONTROLLING
FACTORS

• Size
• Ownership

Figure 1: An Integrative Model of TM Influence on the SDM Process

32
Table 1 : Means, Standard Deviations, Reliabilities and Intercorrelations for Variables Assessed in this Study

VARIABLES MEAN STD ALPHA No of 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15


Items

1. Rationality/Comprehensiveness 3.25 .73 .94 5 1.00


a 0.0 1.0 .89 7 31 1.00
2. Set of Formalised Rules
a 0.0 1.0 .88 3 28 00 1.00
3. Formal Co-ordination Devices
4. Hierarchical Decentralisation 2.77 .54 .93 5 42 00 36 1.00
5. Lateral Communication 2.23 .56 .87 5 62 .28 .44 .54 1.00
6. Politicisation 2.97 1.34 .77 4 31 -09 22 14 07 1.00

7. CEO’s Need for Achievement 2.15 .63 .70 6 -02 14 09 -12 00 -06 1.00
8. CEO’s Risk Propensity 3.14 .56 .73 15 14 -16 09 06 23 -12 -01 1.00
9. CEO’s Tenure 8.74 7.65 N/A N/A 11 -10 22 36 19 07 14 02 1.00
10. CEO’s Education 3.36 .89 N/A N/A 11 -04 24 -15 10 -07 05 17 -35 1.0
0

11. TMT’s Education 85 16.7 N/A N/A 39 19 04 00 22 21 -43 19 -14 17 1.0


0
12. TMT’s Competitive Aggressiveness 3.35 1.18 .70 3 39 26 18 20 62 -09 12 44 11 16 21 1.00

13. Size 2.76 2.74 N/A N/A 09 04 -08 -10 -15 25 11 -21 02 -04 05 -34 1.00
14. Environmental Hostility 2.94 .74 .69 5 -28 -28 02 05 -31 -09 02 -09 -10 07 -46 -42 00 1.00
15. SBU vs Independent Company .47 .50 N/A N/A 33 42 21 -08 15 22 20 22 -20 07 27 17 -10 -36 1.00

Note : Decimals of Correlation Coefficients were omitted For Coefficients greater than r > 0.198 p < 0.05
For Coefficients greater than r > 0.275 p < 0.01 For Coefficients greater than r > 0.35 p < 0.001
a
Variables are factors (principal components) incorporated in the analysis

33
34
Table 2. Hierarchical Regression Results a
VARIABLES : MODEL 1 : MODEL 2 : MODEL 3 : MODEL 4 : MODEL 5 : MODEL 6 :
COMPREHENSI- FORMALISED CO-ORDINATION HIERARCHICAL LATERAL POLITICISATION
VENESS/ RULES DEVICES DECENTRALISATION COMMUNICATION
RATIONALITY

1st step:
Control Variables
ÄR2 .154 * .207 *** .055 .018 .125 * .126 *
R2 .154 * .207 *** .055 .018 .125 * .126 *
2nd Step:
CEO’s Personality
Characteristics
ÄR2 .017 .066 + .004 .013 .029 .037
R2 .171 .273 .059 .031 .154 .163

3rd Step: CEO’s


Demographic
Characteristics
ÄR2 .057 .003 .195 *** .154 ** .051 .027
R2 .228 .276 .253 .185 .205 .190

4th Step: TMT


Characteristics
ÄR2 .164 *** .111 ** .015 .062 + .228 *** .042
R2 .392 .387 .269 .247 .432 .232

FULL MODEL
CONTROL VARIABLES
• Size .258 * .130 .012 .035 .073 .258 +

• Environmental Hostility .158 .057 .21 .259 + .024 .121

• Controlled vs .347 ** .420 ** .358 * .107 .124 .33 *


Independent

CEO’S PERSONALITY
CHARACTERISTIC
• Need for Achievement -.109 .055 -.097 -.255 + -.127 -.107

• Risk Propensity -.138 -.405 *** -.106 -.075 -.086 -.171

CEO’S
DEMOGRAPHIC
CHARACTERISTICS
• Tenure in the position .214 + -.091 .427 ** .385 ** .192 + .174

• Education .067 -.126 .352 ** -.06 .071 -.035

TMT’s
CHARACTERISTICS
• Education .256 + .120 -.020 -.019 .038 .260 +

• Competitive .47 *** .429 ** .170 .342 * .646 *** .023


Aggressiveness

R2 .392 .387 .269 .247 .432 .232


Adjusted R2 .300 .295 .159 .134 .347 .11
F 4.30 *** 4.20 ** 2.45 * 2.18 * 5.08 *** 1.94 +

• p < .10 * p < .05 ** p < .01 *** p < .001

a
Values Shown in the Regression Models are the Standardised Regression Coefficients. N=70

35
Appendix

Operationalization and Reliability of Strategic Decision Process Characteristics


SD MAKING PROCESS OPERATIONALIZATION
DIMENSIONS
1. RATIONALITY / This construct is based on Fredrickson’s (1984) Rationality/comprehensiveness dimension. Five
COMPREHENSIVENES stages in the SD process are measured (i.e. the situation diagnosis, alternative generation,
S alternative evaluation, making of the final decision and decision integration). For each of these
stages Fredrickson’s eight rationality elements are measured on five-point Likert-type scales (i.e.
extend of scheduled meetings, assignment of primary responsibility, information seeking
activities, systematic use of external sources, employees involved, use of specialised consultants,
years of historical data review, and functional expertise of people involved). The rationality
elements for each stage are summed to create five additive variables, each representing the
rationality/comprehensiveness dimension of the respective stage. Summation of these five
variables results in an overall measure of rationality-comprehensiveness of the process.

2. FORMALISED This construct is one of the three factors extracted from a factor analysis investigation involving
RULES seventeen items measuring the degree of formalization/standardisation of the process. This
specific factor variable incorporates seven items and measures the degree of rule formalization
during the making of the SD. Sample items include: The degree to which there exists a written
procedure guiding the process, (2) existence of a formal procedure to identify alternative ways of
action, (3) formal screening procedures, (4) formal documents guiding the final decision, (5)
predetermined criteria for SD evaluation. The measurement scale ranges from ‘1’ absolutely
false to ‘7’ absolutely true.

3. CO- This factor variable measures the existence of a number of co-ordination devices during the
ORDINATION decision. Such devices may include ‘1’ specially formed task forces ‘2’ specially formed
DEVICES interdepartmental committees, ‘3’ specially formed liaison devices.

4. HIERARCHICAL This additive variable measures the extent of vertical decentralisation of the decision-making
DECENTRALISATION during all the phases of the process. It is based on the total amount of participation of various
hierarchical levels and departments in each of the previously mentioned five phases of the
process. The five hierarchical levels include owner-main shareholder, CEO, first level directors,
middle management and lower management. Responses are taken on a five-point Likert-type
scale, anchored with ‘1’ no involvement at this stage to ‘5’ active involvement and influence. By
adding all hierarchical layers for every stage in the process, five additive variables were obtained,
each measuring the hierarchical decentralisation in the respective stage. Summing all five
variables resulted in an overall measure of hierarchical decentralisation.

5. LATERAL Lateral communication was measured in a similar way to hierarchical decentralisation, except
COMMUNICATION from that it measures the degree of balanced participation of all major departments in the
adopted five stages of the process. The major departments include: finance-accounting,
production, marketing-sales, personnel, and purchasing department.

6. This variable results from the addition of four seven-point Likert-type scales measuring the
POLITICISATIO extent of coalition formation, the degree of negotiation taken place among major participants, the
N degree of external resistance encountered and finally the degree of process interruptions
experienced. Scales range from ‘1’ absolutely false to ‘7’ absolutely true.

36
37