Organizational theorists have explained the functioning of organizations from a number of alternative perspectives. A persistent debate within the arguments put forth by each perspective is the efficacy of strategic leadership on the functioning of the organization. Early organizational theorists viewed the role of strategic leadership as critical to the maintenance and survival of the organization.
The Carnegie School further elaborated on the role of strategic leadership by focusing on the constraints to the decision-making process in organizations, and by viewing organizational goals as intended outcomes set by the organization’s leaders. Later theorists tended to ignore strategic leadership altogether, and instead concentrated on an organization’ external environment and technology utilization as the primary determinants of an organization’s survival.
The importance of strategic leadership was revitalized with the introduction of the concept of “strategic choice”. The upper echelons perspective proposes that by studying the observable characteristics of the TMT as indicators of managerial beliefs, preferences, and values organizational theorists and strategy researchers in particular can predict an organization’s strategy and performance he upper echelons perspective of organizations has become one of the dominant theoretical perspectives in strategy research, generating numerous articles since its introduction.
The upper echelons model proposes that by studying the observable characteristics of the TMT as indicators of managerial beliefs, preferences, and values organizational theorists and strategy researchers in he manner in which TMT composition impinges on organizational outcomes, can be distinguished by the mode of measurement used in assessing the composition of the TMT.
Modes of measurement can be classified according to whether they are based upon the examination of TMT characteristic similarities and differences (i. e. heterogeneity) labeled “relational modes of measurement,” or whether they are based upon the direct operationalization of TMT characteristics (e. g. average age, average tenure, etc.) labeled “non-relational modes of measurement” Beyond obvious differences in their measurement, the two approaches are conceptually different in their theoretical grounding.
With relational modes of measurement, the effects of TMT characteristics are contingent upon the distribution of characteristics among the TMT members. In sum, the two different modes of measurement used in assessing the effects of TMT composition on organizational outcomes have different theoretical underpinnings. Relational measures assume that TMT composition sets in motion processes within the group that mediate the relationship between TMT composition and organizational outcomes. Non-relational measures make no assumptions about the process consequences of TMT composition, and instead focus on the direct link between TMT composition and organizational actions.