2 research outputs found
Strategic responses of medium sized firms: The role of TMTâs perceptions and characteristics in decision making processes
Many decisions made by the organizationâs top management team (hereafter called indifferently TMT or top management team) have a high likelihood of failure (Nutt, 1999). This situation might be shocking but indeed, it is much more common than one might think (Bloom et al., 2012). In fact, we can easily realize this reality when reading the current business press where we will probably be confronted with several cases of failures that have been caused by any type of TMT decisions. Of course, we will also see cases of success, exemplifying managers and recipes of good practices (e.g., Eide et al., 2016; Schrage, 2013); but these will be minor. Thus, as Bloom et al. (2012) state, the group of badly managed firms will be much bigger than those that are well-managed.
Overall, these worrying facts emphasize the importance to study the top management teams and, in this way, to unravel the complex existing interplay between their characteristics, decision-making processes and contingency factors which will undoubtedly influence the behavior adopted by organizations (Hambrick & Mason, 1984). Research on TMTs started to flourish after the publication of the seminal work by Hambrick and Mason (1984). In particular, this paper proposed the upper-echelons theory which basically highlighted the importance to analyze organizationsâ key decision makers when explaining the outcomes, strategic decisions and behavior adopted by a firm (Bantel & Jackson, 1989; Buyl et al., 2014; Hambrick & Mason, 1984). In other words, in order to understand why organizations did the things they did or behaved in one way or another Hambrick and Mason (1984) suggested that we had to study the characteristics, experiences and cognitive values of these actors (Hambrick & Mason, 1984). This assumption inspired many scholars to empirically investigate the impact of such features on a myriad of outcome variables such as turnover, innovation, diversification, and organizational performance (Boone et al., 2005).
However, the extant upper-echelons research has typically focused on managersâ observable characteristics (such as demographics or functional experiences) and has rarely considered managerial attitudes and perceptions explicitly â even though the latter are actually assumed to act as perceptual filters of reality, used in decision-making (Cho & Hambrick, 2006; Hambrick, 1994; Lawrence, 1997). This argument is supported by Ocasioâs (1997) research where it is advocated that managersâ decisions depend to a high degree on how they perceive the reality and how much they feel the necessity to react. Thus, scholars seem to agree in determining that the incorporation of insights from a cognitive approach could generate a better understanding of managerial strategic decisions (Greve, 2003).
In a related vein, performance feedback literature also bases its ideas on this concept. More specifically, this stream of research, heavily influenced by the Behavioral Theory of the Firm (BTF; Cyert & March, 1963), studies the effects of (managerial) performance feedback on organizational behavior. Thus, based on several assumptions of the Carnegie School such as bounded rationality, backward-looking orientation and rule-based adaptation (Cyert & March, 1963; Gavetti et al., 2012; March & Simon, 1958; Shinkle, 2012), the most prominent proposition in this body of literature contemplates that an organizationâs decision makers (its managers) will (only) pursue strategic changes when performance falls below preset aspiration levels (e.g., Greve, 2003; 2008). The underlying idea is that such âattainment discrepancyâ leads to dissatisfaction, which subsequently drives managersâ intention to adapt the organizationâs current strategies in an effort to fix this problem (also called âproblemistic searchâ; Shinkle, 2012).
However, despite the dominance of the BTF-influenced thinking, scholars have also developed contradictory theoretical perspectives, and found mixed evidence (Bowen et al., 2010). For instance, Jordan and Audia (2012) theorized that a failure to meet preset aspiration levels might not lead to a higher intention to change, if managers choose to assess their performance as satisfactory in a search to enhance their self-image. Similarly, Labianca et al. (2009) proposed and found that strong performers sometimes have higher intentions to change, if they actively strive for even higher performance (aspirations) levels in the future. Supporting these authors, Haleblian and Rajagopalan (2005) suggest that it will not be appropriate to apply the same standard to determine aspirations for all organizations, as aspirations can themselves fluctuate across managers in varying organizations. Consequently, these equivocalities emphasize the need for studies that scrutinize âattainment discrepancyâ and its impact on subsequent organizational behavior in more detail (Jordan & Audia, 2012).
In this dissertation, we take up the challenge and taking into account that performance feedback theory is essentially a cognitive theory (Labianca et al., 2009; Shinkle, 2012), we contribute to this issue by digging deeper into the micro-processes and mechanisms that underlie the translation of âattainment discrepanciesâ into subsequent actions. More particularly, we highlight that scholars have almost invariably operationalized âattainment discrepancyâ as the gap between an organizationâs realized performance on the one hand and historical and/or peersâ performance levels on the other hand (for a review, see Shinkle, 2012). Thus, the implicit assumption which remains here is that aspiration levels (and âattainment discrepanciesâ) are (only) based on objective and visible results â either of the organization itself or of its peers â and, by extension, that managersâ motives to undertake changes are only â or most crucially â driven by such objective results. However, both practice and academic work (e.g., Fiegenbaum et al., 1996; Labianca et al., 2009) have made clear that many other factors also drive managersâ aspiration levels, and, hence, their perceptions of âattainment discrepancyâ. To address this issue, in this work we propose to focus on alternative indicators of âattainment discrepancyâ, more closely connected to managersâ perceptions of and feelings about the realized results. Specifically, we propose two options:
(1) The use of the managerial complacency with firmâs results, a variable that according to several authors might be understood as a kind of conformism or feeling of quiet pleasure or security, while unaware of some potential danger or threat (e.g., see Pascal, 2011). However, as stated by Kawall (2006) the latter may seem problematic insofar as it could cause some confusion among scholars when linking appropriate or justified feelings of satisfaction as instances of complacency. Conversely, complacency requires that one be confused with its level of achievement, leading to an excessive level of satisfaction (Kawall, 2006). Miller and Chen (1996) support this proposition by indicating that the range of actions and the search knowledge of competitive alternatives adopted by a firm are influenced (and restricted) in part by the complacency of firmâs decision makers. Similarly, SĂĄnchez-Peinado et al. (2010, p. 75) establish that âthe intentionality of strategic change is closely related (among other factors) to how managers perceive and interpret the environmental changesâ and to their âlevel of complacency with the firms' performanceâ, which would specifically reduce this will.
According to this stream of reasoning, in this research managerial complacency is measured as the difference between the traditional (objective) measurement of âattainment discrepanciesâ carried out by the BTF-inspired literature and the CEOâs satisfaction with these results. That is to say, in order to consider that a manager holds a complacent behavior he/she should exhibit high levels of satisfaction despite objectively the results obtained do not reflect the same threshold. Consequently, we argue that behavioral change in situations of bad results will not be direct, but will depend on the level of complacency that the managers (and the CEO as their representative) face with that situation (Gordon et al., 2000). In fact, following Gordon et al.âs (2000) research we argue that the objective results will be (just) an indicator of the degree of adjustment between the business strategy and the conditions imposed by the environment and will only serve as a warning system for stakeholders (including managers) on the validity of the current strategy. However, as long as those responsible for driving change are not dissatisfied with the results achieved by the company (meaning a little complacent evaluations), there may not be enough incentive to act (SĂĄnchez-Peinado et al., 2010). That is to say, following BTFâs precepts we expect that the lower the CEOâs complacency, the more the CEO will be inclined to change its strategic behavior.
(2) The use of CEOsâ satisfaction with performance as a direct indication of âattainment discrepancyâ. Hence, with this proposal we individually consider CEOâs satisfaction with performance as a measure of âattainment discrepancyâ (Haleblian & Rajagopalan, 2005) instead of using a combination of it with the relative objective performance obtained by the firm.
In particular, we do so by digging on the significance and content of this cognitive variable which, according to several scholars, can be seen as an âa posteriori variableâ that adds perceptual information to the interpretation of performance feedback that is not captured by the objective results of the organization itself or its peers (cf., Matho & Khanin, 2015). In this line, Carree and Verheul (2011) indicate that besides objective results, a range of other factors, such as individual goals, expectations, demographic attributes, previous experiences, pressures from stakeholders, etc., will be also collected by this item. We therefore propose to assess CEOsâ satisfaction with performance as a more direct, perceptual indicator of âattainment discrepancyâ â i.e., of how CEOs evaluate and interpret the obtained results.
Consequently, following the BTFâs baseline logic we expect that the lower the CEOâs satisfaction with the obtained results (i.e., the higher âattainment discrepancyâ), the more the CEO will be inclined to change its strategic behavior. The latter also allows us to use objective performance cues â and more in particular the relative performance obtained by a firm in comparison to their peers or organizationsâ performance compared to the industry â as a moderator of this relationship. We do so due to while the BTF-inspired research proposes a universally negative relationship between dissatisfaction generated by âattainment discrepancyâ and subsequent change intentions, other theories and perspectives have suggested differently. For instance, high satisfaction with results (as a consequence of a small or negative âattainment discrepancyâ) could instigate self-confidence and efficacy beliefs and, subsequently, proactive behaviors such as strategic changes (Chatterjee & Hambrick, 2011; Haleblian & Rajagopalan, 2005; Mahto & Khanin, 2015). Conversely, high dissatisfaction with such results might cause conservative behavior (Chatterjee & Hambrick, 2011; Staw et al., 1981). In an effort to reconcile these apparently contradictory perspectives, we propose that contextual cues at the organizational level might matter in determining organizational behavior. In particular, we argue that the organizationâs performance compared to the industry indicates this organizationâs relative position in its industry (Kacperczyk et al., 2015) and serves as a signal of the adequacy of the organizationâs current strategies (Baum et al., 2005) as well as of CEOsâ overall capabilities (Chatterjee & Hambrick, 2011). We expect that this contextual cue will interact with CEOsâ satisfaction levels, and that the negative baseline effect of CEOsâ satisfaction with performance on the magnitude of intended strategic changes will be less pronounced the higher the organizationâs performance compared to the industry.
Once disentangled how managerial decisions are made and in which degree they rely on objective vs perceptual indicators, the aim of this study is to move away from the prism of processes and focus its attention on the effects that organizational-level characteristics might have on generating different results among firms. In particular, our analysis focuses on the last financial crisis occurred globally, which reached its most virulent peak during 2008 and 2009 and which has been characterized by its non-munificent features and devastating effects on the (Spanish and worldwide) economy; and more specifically, on testing whether the fact of being a family firm influences the financial position obtained by an organization during such non-benevolent contexts.
Family firms, which represent the 88.8% of the whole Spanish business base (Instituto de la Empresa Familiar, 2015), are usually defined as a unique combination of two sets of rules, values, and expectations: the ones related to family and the ones related to business (Flemons & Cole, 1992; Gersick et al., 1997; Tagiuri & Davis, 1996). Moreover, it is argued that these firms share certain characteristics that render them unique in terms of patterns of ownership, governance, succession and the desire for the continuity of the family involvement in the organization (Chua et al., 1999; Steier, 2003). Similarly, family firms often have a strong emotional component present in their decision-making process that separate them from other organizational forms (Basco & PĂ©rez-Rodriguez, 2009; Berrone et al., 2010; Distelberg & Sorenson, 2009; Gomez-Mejia et al., 2011; Hall & Nordqvist, 2008). This emotional component is reflected in its will to preserve the socioemotional wealth of the firm that according to Gomez-Mejia et al. (2007, p. 106) refers to âthe non-financial aspects of the firm that meet the familyâs affective needs, such as identity, the ability to exercise family influence, and the perpetuation of family dynastyâ. Closely related to this aspect, several scholars have highlighted that family business managers âhave superior incentives for maximizing firm value and, therefore, need fewer compensation-based incentivesâ (McConaughy, 2000, p. 121). That is to say, these managers will not have their individual interests as a priority but those of the organization. Similarly, family ties seem to affect the way these companies invest, which is more related to efficiency because of their higher willingness to continue (Gimeno et al., 1997). This supposition is confirmed by several research such as Jensen (1986) who argues that family firms create greater cash levels, which make them rely less on debt as a form of financing; and Anderson and Reeb (2003) who anticipate that these firms have greater reliance on self-financing than non-family firms, which reduces their likelihood of default.
Based on these findings, in this study we propose that family ownership will affect positively the financial strength obtained by an organization and, as we test this phenomenon under a non-munificent context (which could affect the future and viability of the firm), we argue that these results would do nothing but support our prior definition of socioemotional wealth.
Additionally, following Hofer and Schendel (1978) and Sharma et al.âs (1997) research we argue that considerable understanding could be gained by appending strategic management insights on the family firm research approach. In this vein, we establish that the effect of family ownership on firmâs financial strength will not be isolated but will be also affected by several aspects such as the organizationâs scope of operation (measured with firm internationalization and diversification) and the characteristics of its key-role players (measured by TMT educational level and TMT average age). In particular, and especially during the non-munificent context where we set our analysis, we anticipate a positive moderation effect of both internationalization and diversification â which will potentially minimize the global risk faced by such firms and will increase their opportunities for success due to their access to more heterogeneus markets (Goetzmann & Rouwenhorst, 2005; Sanchez-Bueno & Usero, 2014) â on the relationship between family ownership and firmâs financial strength.
For its part, we anticipate that TMT educational level will negatively affect this relationship (as opposed to older managers that will positively influence this interaction). We based our argumentation on concepts from the upper-echelons theory (Hambrick & Mason, 1984) which convincingly claims that managers and their characteristics matter in affecting strategic decision-making processes, and, in turn, organization-level outcomes. More particularly we establish that highly educated managers will leverage more due to their inherent characteristics such as higher confidence with investments, more openness to change, better deal with ambiguity and complexity, etc. (e.g., Bantel & Jackson, 1989; Barker & Mueller, 2002); therefore negatively affecting the financial strength presented by their (family) firms. Contrarily, we anticipate that older managers will leverage less as they tend to choose for more conservative capital structures, be more prudent with their actions and behavior, possess less physical and mental stamina to seize perceived opportunities (Chen et al., 2010; Child, 1974; Hambrick & Mason, 1984) will leverage less; therefore positively affecting the financial strength presented by their (family) firms.
To summarize, the main goal of this doctoral dissertation is to investigate how managerial decisions are made and in which degree they rely on objective vs perceptual indicators. With this, we attempt to incorporate insights from a cognitive approach into performance feedback literature and therefore, to better understand organizationâs behavior. As no decision can be evaluated without its consequences, in this research we also intend to unravel the reasons why some organizations have better (financial) results than others and, especially, during the last financial crisis occurred globally. To do so, we investigate the effect of family ownership, firmâs context of activity and managerial characteristics as potential factors of this phenomenon. To reach these objectives we use both archival and questionnaire information from a sample composed by 137 Spanish medium-sized enterprises
La aplicaciĂłn TurningPoint como herramienta de aprendizaje transformacional en los procesos educativos
The educational convergence project driven by the European Higher Education Area (EHEA) has created new teaching methods and evaluation processes in university education systems. This new pedagogical approach generates an unquestionable opportunity for different segments of the university community see ICTs as an essential tool of the procedure of educational content development, which facilitate the teaching-learning process. This article presents the TurningPoint tool, which focuses on promoting teacher-student interactions, facilitating participation and ongoing assessment. This tool has advantages over other existing applications because of its variety of utilities and potential use. Moreover, it has been successfully used in several programs promoted by the Faculty of Economics of the University of Valencia