Top Management Team Structure: Differential Effects by Environmental Context

Abstract

Despite the extensive literature on top management team structure (demographics), disagreement persists as to whether specific aspects of team structure have, on the whole, positive or negative results for the firm. The author addresses conflicts in the literature by using several typical structural measures in different contexts. Shorter-tenured, heterogenous teams are found to provide the skills needed to address environmental complexities and will be more productive in turbulent environments because they deliver problem solving skills and new perspectives on strategic formulation and implementation processes. Longer-tenured, homogeneous teams are found to be more productive in stable environments because they will promote basic team maintenance functions (socialization, cohesion, etc.). Firms that are the most successful financially are ones that match their team structures to the environmental context over time. The results reported are unique because time, different contexts, and financial performance were combined to assess the interaction of top management teams with their environments. Surprisingly, the type of turbulence encountered in the firm's context may determine whether a specific element of team structure will be beneficial or detrimental to financial performance. Relatively high levels of constant environmental change require different team structures than unusual, disruptive change. Differences are discussed.