New CEOs and their collaborators: Divergence and convergence between the strategic leadership constellation and the top management team

• Published date: 01 March 2018
• Author: David Seidl,Shenghui Ma
• DOI: http://doi.org/10.1002/smj.2721
• Date: 01 March 2018

SPECIAL ISSUE ARTICLE

New CEOs and their collaborators: Divergence

and convergence between the strategic leadership

constellation and the top management team

Shenghui Ma | David Seidl

Department of Business Administration,

University of Zurich, Zurich, Switzerland

Correspondence

Shenghui Ma, Department of Business

Administration, University of Zurich,

Universitätstrasse 84, 8006 Zurich, Switzerland.

Email: shenghui.ma@uzh.ch

Research Summary: An important challenge that new

CEOs face is establishing a group of immediate collabo-

rators, which we call the “strategic leadership constella-

tion.”Drawing on a comparative case study, we show

that due to constraints on the CEO to change the top

management team (TMT), the composition of the strate-

gic leadership constellation initially tends to differ from

that of the TMT: in some cases, it consists of a subgroup

of the TMT; in others, it also comprises individuals out-

side the TMT such as staff members or lower-level man-

agers. We show that the discrepancies between the

strategic leadership constellation and the TMT lead to

tensions that trigger a process of convergence between

these two bodies, particularly as the constraints on TMT

change decrease and the CEO’s needs evolve.

Managerial Summary: A major challenge that new

CEOs face is establishing a group of close collaborators,

which we call the “strategic leadership constellation.”

Our study shows that due to different constraints on

changing the executive team, the composition of the stra-

tegic leadership constellation initially tends to differ from

that of the executive team: in some cases, it consists of a

subgroup of the executive team; in others, it also com-

prises individuals outside the executive team, such as

staff members or lower-level managers. We show that the

discrepancies between the strategic leadership constella-

tion and the executive team lead to tensions that trigger a

process of convergence between these two bodies, partic-

ularly as the constraints on changing the executive team

decrease and the CEO’s needs evolve.

Received: 31 August 2015 Revised: 5 June 2016 Accepted: 18 June 2016 Published on: 12 December 2017

DOI: 10.1002/smj.2721

606 Copyright © 2017 John Wiley & Sons, Ltd. wileyonlinelibrary.com/journal/smj Strat Mgmt J. 2018;39:606–638.

KEYWORDS

CEO adviser, CEO succession, CEO–TMT interface,

strategic leadership constellation, TMT formation, top

management team

1|INTRODUCTION

CEO succession is an important episode in the evolution of top management teams (TMTs)

(Finkelstein, Hambrick, & Cannella, 2009; Helmich & Brown, 1972; Keck & Tushman, 1993).

Numerous studies have shown that new CEOs typically make changes both in the members and in

the positions of the TMT (for reviews, see Hutzschenreuter, Kleindienst, & Greger, 2012; Ma,

Seidl, & Guérard, 2015). Through such changes, CEOs aim to bring in new perspectives, skills, and

support that they feel necessary for realizing their strategic agenda (Friedman & Saul, 1991; Kar-

aevli, 2007; Keck & Tushman, 1993; Shen & Cannella, 2002; Tushman & Rosenkopf, 1996). While

TMT change as an outcome of CEO succession (Helmich & Brown, 1972; Keck & Tushman, 1993)

or as a mediator or moderator of other succession outcomes (Karaevli, 2007; Shen & Cannella,

2002; Tushman & Rosenkopf, 1996) is well documented in the literature, we know very little about

how the actual process of TMT change unfolds. In particular, there is hardly any research on how

new CEOs deal with potential restrictions on TMT change, for example, when incumbent top man-

agers are particularly powerful (Denis, Langley, & Pineault, 2000; Finkelstein, 1992). Similarly, few

studies examine how new CEOs work with fragmented TMTs in the transition period (Hambrick,

1995). This lack of research on the actual process of TMT change is somewhat surprising, consider-

ing the impact of the TMT on the functioning of an organization and the repeated calls for more

research on the dynamics that underlie the formation and evolution of the TMT (Hambrick, 2007,

p. 338; Pettigrew, 1992, p. 176).

This article aims to fill this gap by systematically investigating the drivers, constraints, and

dynamics of establishing a TMT, which we define in line with Jones and Cannella (2011, p. 15) as

comprising “the CEO and some set of other top executives (i.e., vice-president and above) who

report directly to the CEO.”For this purpose we draw on two emerging perspectives in the upper

echelons literature: the CEO–TMT interface perspective and the CEO-adviser perspective. The

advantage of these two perspectives, which have not yet been applied to CEO succession in particu-

lar, is that they examine explicitly how CEOs collaborate with other actors to shape the strategic

direction of the organization. First, the CEO–TMT interface perspective highlights that CEOs influ-

ence strategic outcomes by configuring the TMT and managing TMT processes (Edmondson,

Roberto, & Watkins, 2003; Kor & Mesko, 2013; Ling, Simsek, Lubatkin, & Veiga, 2008; Peterson,

Smith, Martorana, & Owens, 2003; Simsek, Veiga, Lubatkin, & Dino, 2005). This can help explain

how CEOs reconfigure a TMT with particular capabilities to fulfill their strategic goals (Kor &

Mesko, 2013). Second, the CEO-adviser perspective draws attention to the fact that CEOs seek

advice regarding strategic decisions selectively both from individuals within and outside the TMT

(Arendt, Priem, & Ndofor, 2005; Jones & Cannella, 2011; Mooney & Amason, 2011; Pearce, 1995;

Roberto, 2003). Several studies following this line of research have shown that CEOs often consult

only an “inner circle”of the TMT (Mooney & Amason, 2011; Roberto, 2003), and others indicate

MA AND SEIDL 607

that CEOs often turn for advice in strategic decision making to the board of directors (Jones & Can-

nella, 2011; Pearce, 1995) or even to people outside the organization (Arendt, Priem, & Ndofor,

2005; McDonald & Westphal, 2003). This indicates that a CEO’s group of advisers may not be

identical to the TMT, which could help explain how new CEOs are able to work with a TMT in

transition.

Against this backdrop, we ask the following exploratory research question: How do new CEOs

establish and develop their group of immediate collaborators? To address this question we draw on

data from a longitudinal qualitative study of eight firms, each of which had just appointed a new

CEO when we started collecting our data. For each case, we tracked the CEO’s activities over his

first 2 years via regular interviews (every 4–8 weeks). We complemented these data with interviews

with other organizational members, including other TMT members, members of the board of direc-

tors, and staff members, to capture different perspectives on the postsuccession process and to gain

a more comprehensive understanding of each case. This process generated a dataset of 135 inter-

views in total.

Our analysis of the empirical data yielded the following results. First, in line with the CEO-

adviser perspective we found that new CEOs establish a group of immediate collaborators who are

selected from both the TMT and outside it. We refer to this group of collaborators as the “strategic

leadership constellation”to acknowledge its importance in shaping the strategic direction of the

organization and to distinguish it conceptually from the TMT. We identified two drivers in the

establishment of the strategic leadership constellation: strategic orientation needs, which are con-

cerned with orienting the organization according to the CEO’s strategic agenda, and personal inte-

gration needs, which are about connecting the CEO with the organization. Second, we found that

new CEOs are often constrained in their ability to reconfigure the TMT according to the two needs.

As a consequence, CEOs are often forced to include individuals outside of the TMT in their strate-

gic leadership constellation. This results in discrepancies in the composition between the strategic

leadership constellation and the TMT, especially in the early stages of the new CEO’s tenure. Third,

we found that these discrepancies frequently result in increasing interpersonal tension. This tension,

in turn, leads to the gradual convergence between the strategic leadership constellation and the

TMT, particularly as the constraints on TMT change decrease and the CEO’s needs evolve. Taken

together, our findings contribute to the upper echelons research by revealing the detailed process of

TMT formation and evolution during CEO succession. More generally, our study contributes a

“strategic leadership constellation perspective”on upper echelons, which bridges and extends the

CEO–TMT interface and the CEO-adviser perspectives.

2|THEORETICAL BACKGROUND

2.1 |CEO succession and TMT change

A central assumption in the field of upper echelons research is that CEOs require a group of imme-

diate collaborators in order to shape the strategic direction of their organization (Hambrick, 2007;

Hambrick & Mason, 1984). Accordingly, researchers have taken a particular interest in the effect of

CEO succession on the composition of the TMT (Hutzschenreuter, Kleindienst, & Greger, 2012;

Ma, Seidl, & Guérard, 2015). Some scholars have found that one of the first actions many new

CEOs take is to replace some of their top managers. For example, Kelly (1980) found that within

their first 6 months in office, new CEOs tend to build a team with an equal number of new and old

608 MA AND SEIDL