Informal roles in top management teams can complement the formal structure but also cause conflict, says new review study co-authored by Professor Yasemin Kor of Cambridge Judge Business School.
There has been abundant academic research on the formal role of certain executives such as a firm’s Chief Strategy Officer, but far less on informal roles and working relationships in top management teams despite their clear importance. A new study co-authored by Professor Yasemin Kor of Cambridge Judge Business School helps plug that knowledge gap.
The review published in Strategic Management Journal finds that informal role structure can work two ways: while it can complement the formal structure by providing a company’s top management team (TMT) new dimensions or enhance TMT collaboration, it can also cause conflict by competing with the formal role structure for power and influence.
For example, one study cited in the review highlighted a case in which the ‘controller’ (who was not part of the executive team) became a confidant of the firm’s CEO, which caused tension when the CFO realised she was not involved in strategic decisions as much as the controller was.
Looking at roles as a bundle
The study also plugs another knowledge gap: while previous studies have largely focused on the impact of individual positions (such as Chief Operating Officer) in isolation, “it is not just the individual impact of one position that matters, but the relevance and complementarity of all TMT roles as a bundle and how such bundle meets the firm’s needs and strategic and institutional demands,” the authors say. “Likewise, it is not just the configuration of the role structure but also its orchestration (management) that matters.”
The review draws on 13 key articles (SMS Collection) and the broader literature on TMT role structure.
Developing a new framework
“The study addresses the fact that previous studies on TMTs have focused more on composition and incentives than on role structure,” says Yasemin, Beckwith Professor of Management Studies at Cambridge Judge. “So our aim was to develop a framework for understanding these different aspects of role structure and how it affects firm strategy and performance.
“We also sought to develop a better understanding on role structure function and changes by looking at both formal and informal aspects of this structure, and to help bridge research on TMTs with organisational research focused on sociological perspectives (such as resource dependency and institutional perspectives).” For example, TMT role structure can be reflective of resource dependencies and institutional pressures the company endures or may signal the power relationships within the organization.
One area explored in the review is how executives responsible for functional areas interact differently with each other than executives who are heads of business units, with the authors noting that business unit executives work more independently and compete for corporate resources.
Scope for further research
The review concludes by noting areas that could be further explored in future research, including an investigation how specific types of organisations such as professional firms or entrepreneurial ventures face “distinctive” strategic and institutional challenges, so they may as a result develop different TMT role structures.
“For example, entrepreneurial ventures may need to organise executive roles flexibly for adaptability and at the same time need to install clear formal roles to attain legitimacy,” the review says, while consulting firms may face tension “between an economic logic and a professional logic”.
Another interesting area for study, the authors say, is the unique institutional environment at state-owned companies in China that have a communist party secretary as chairman who shares responsibility with the CEO. “It would be intriguing to explore the division of responsibility between these two roles and how they interrelate in shaping firm strategy and other outcomes.”
The review in Strategic Management Journal – entitled “Top management team role structure: A vantage point for advancing upper echelons research” – is co-authored by Shenghui Ma of the School of Management at Fudan University in Shanghai, Professor Yasemin Kor of Cambridge Judge Business School, and David Seidl of the Department of Business Administration at the University of Zurich.