School of BusinessBeyond Demographic Proxies

BAM 2011

Professor Robert Galavan

213/09/2011

Beyond Demographic Proxies

Upper Echelons Theory (& Method)

The organization as a reflection of it’s top

managers

Now with only 1,347 citations…

313/09/2011

The premise is simple

• Cyert & March, 1963

• March & Simon, 1958 .Choice is bounded

(rationality)

• Drawn from Child, (1972)

Strategic (non calculable) choices

include a behavioural component

• The basis of UE theory

Strategic choices are therefore a reflection

of managers ideosyncracies

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UE theory

513/09/2011

UE method

613/09/2011

The case for demographics

Top managers reluctance to participate in

psychological tests,

The lack of psychological analogs for

background characteristics and

The requirement for observable

characteristics in the selection/development

of managers and in competitor analysis.

713/09/2011

Conceptual model

813/09/2011

The experience hypotheses

H1 Managers similarity in

heterogeneity of functional experience

will coincide with similarity in their

perception of managerial discretion.

913/09/2011

Independent variables

Experience

H1 Heterogeneity of experience

H2 Age

H3 Length of management experience

H4 Functional background

H5 Hierarchical position

H6 Industry background

H7 Size of organisation

H8 Education

Psychological

H9 Extraversion

H10 Openness

H11 Concern for people

H12 Conscientiousness

H13 Emotional stability

1013/09/2011

Creating dependent variables

Schema or mental model of perceived discretion

• Develop a fixed list of constructs

• Construct the map

• Calculate the distance ratios

1113/09/2011

The fixed list of constructs

Leadership

Strategic planning

Staff morale

Process efficiency

Information technology

Corporate culture

Net margin

Brand recognition

Macro economic environment

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Construct the map

The final output is a 9 x 9 dissimilarity matrix

1313/09/2011

Calculate the distance ratios

DR between all maps

Run cluster analysis (3 found)

Calculate distances from all maps to cluster

centres

The dissimilarity measure to all clusters

creates a fuzzy cluster logic

1413/09/2011

Fuzzy cluster logic

1513/09/2011

Net result is 3 dependent variables

Clus 1

Clus 2

Clus 3

A correlation between the independent

variable and a cluster variable (similarity)

supports a hypothesis.

1613/09/2011

Model with variables

Experience

H1 Heterogeneity of experience

H2 (Similarity) of age

H3 Length of management experience

H4 Functional background

H5 Hierarchical position

H6 Industry background

H7 Size of organisation

H8 Education

Psychological

H9 Introvert-Extrovert

H10 Openness

H11 Concern for people

H12 Conscientiousness

H13 Emotional stability

Perceived discretion

Clus 1 (similarity to)

Clus 2

Clus 3

1713/09/2011

Model with variables

Experience Supported

H1 Heterogeneity of experience No

H2 (Similarity) of age No

H3 Length of management experience No

H4 Functional background Marginal

H5 Hierarchical position Yes

H6 Industry background Marginal

H7 Size of organisation No

H8 Education No

Psychological

H9 Introvert-Extrovert Yes

H10 Openness Yes

H11 Concern for people No

H12 Conscientiousness No

H13 Emotional stability Yes

Perceived discretion

Clus 1 (similarity to)

Clus 2

Clus 3

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Visual of construct levels by cluster

2013/09/2011

Does it mean anything?

Hierarchy position -> Clus 2 (low discretion)

High Neuroticism -> Clus 2 (low discretion)

Extraversion -> Clus 1 & Clus 3 (mid 3 & high)

Introversion -> Clus 2 (low)

Closedness -> Clus 2 (low)

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Operationalising “experience”

2213/09/2011

Operationalising “psychological”