Top Management Teams Flashcards
Define Top Management Teams (TMTs)
- Executives in firms’ upper echelons
- Usually the heads of business functions, product/service categories, and/or geographic areas
List characteristics of heterogeneous / homogeneous TMTs
- Contains members with diverse (similar) backgrounds, preferences, expertise, and knowledge
- May have more (less) difficulty reaching consensus and functioning well as a team
- Can draw on more (less) perspectives when making decisions
- May be more (less) likely to engage in innovation and change
Dispersed (compressed) compensation packages may affect decision making in similar ways (True / False)
True
Define Managerial Discretion
A manager’s latitude of action. Will vary across contexts, organizations, and people.
List factors affecting the amount of discretion
- External environment sources (industry, structure, market growth, regulations)
- Characteristics of the organization (firm size, structure, resource availability)
- Characteristics of the manager (e.g. tolerance for ambiguity, interpersonal skills, confidence)
Define Power
The ability to exert one’s will in the face of resistance and/or to prevent such resistance.
Boards, CEOs, and TMTs all shape firms’ strategies.
Dynamic power relationships among these entities.
List characteristics of Powerful CEOs
- May neutralize the Board by appointing either insiders or sympathetic outsiders.
- May consolidate power by chairing the Board (i.e., duality)
- Power may be both a cause and an effect of long tenure.
How are powerful CEOs advantageous or disadvantageous for firms?
- Unity of authority and accountability and the potential for speed and consistency in decision making
- Dictatorial processes can reduce alternative generation, knowledge diversity, commitment, and decision quality
Define Succession
Succession refers to the departure of leaders and the hiring of others to fill vacated roles
Name the 2 types of managerial labor markets that organizations select managers and strategic leaders from
- Internal Labor Market
- External Labor Market
Define Internal Labor Market
Advancement opportunities for a firm’s existing managers. Promotion from within can produce managers with greater firm/industry familiarity and experience. May encourage stability, continuity, and less turnover.
Define External Labor Market
Opportunities in organizations other than the one for which managers currently work. Promotion from outside can rejuvenate a firm by infusing new ideas and perspectives. May increase the likelihood of strategic change.
Define Human Capital
- The knowledge and skills of the firm’s entire workforce are a resource that requires investment in training and development.
- Competitive advantage frequently originates in human capital.
- Development can be general, industry-specific, or firm-specific.
Define Social Capital
- Relationships inside and outside the firm that help it accomplish tasks and create value for customers and shareholders.
- Internal social capital produces benefits such as coordination, cooperation, and inimitability.
- External social capital produces benefits such as access to knowledge, other resources, and risk-sharing.
Define organizational culture
A complex set of ideologies, symbols, and values that influence the way the firm conducts its business. Culture can be a source of competitive advantage or disadvantage.
