CEO attitudes as determinants of organization design: an integrated model

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Introduction

A centennial of research on organization theory has reinforced a contingency perspective for designing organizations (Mintzberg 1979; Daft 1989; Woodward 1965; Blau and Schoenherr 1971; Lawrence and Lorsch 1967; Galbraith 1977; Pugh et al. 1969a, 1969b; Miles and Snow 1978). In theory, organizations with similar contingencies should exhibit similar designs. However, in reality, great variations in organization design exist across firms within a given industry or setting (Bobbitt and Ford 1980). Why might this be so?

Failure to consider this discrepancy may be attributed to the historical, yet artificial, separation amongst the various sub-disciplines that constitute the management sciences. Specialists in organization behaviour generally examine micro-level phenomena; organization theorists concentrate on the macro end of the spectrum. The interactionist perspective (e.g. Trevino 1986; Hellriegel et al. 1992) has recognized that organizational features often influence individual psychological responses. Analogously, we argue that psychological attributes of the individual can, in some instances, exert profound effect upon macro-level properties of the organization. Specifically, we believe that one crucial contingency -- the attitudes of the general manager and in particular the chief executive officer(1) -- is a major source of variations in organization design.

Child (1972), Hrebiniak and Joyce (1985), and Donaldson (1985) conclude that managers do matter, even though they function within a complex and constraining environmental setting. Mintzberg (1989) and Hambrick and Brandon (1988) observe that the basic values and beliefs of the CEO are a key force in shaping the organization. Meyer and Starbuck (1992) note that top managers may imprint their own values, by embedding these values into the design of the organization. The idea finds its best-known expression in upper-echelons theory (Hambrick and Mason 1984). However, empirical studies involving upper-echelons theory have concentrated more on CEOs' shaping of their top-management teams than upon CEOs' impact upon design throughout the organization.

In the case of small organizations or start-up entrepreneurial firms, research has shown that founders and chief-executive officers indeed shape their corporations according to their own preferences (e.g. Eisenhardt and Schoonhoven 1990; Eisenhardt and Bourgeois 1988; Miller and Droge 1986; Miller and Toulouse 1986). As Meyer and Starbuck (1992) concluded, based on a retrospective case study at NCR, the same phenomenon may also help to explain design variation and discontinuities throughout large managerial firms -- not merely in small, closely held companies, and not just in the upper echelons of the organization. With notable exceptions (e.g. Hambrick and Brandon 1988; Bobbitt and Ford 1980), this topic has received little attention. However, Stopford and Baden-Fuller (1990) note that in all six major manufacturing organizations whose turnarounds they studied, the CEO appeared to be the crucial impetus to change. Anecdotally, it seems that recent organizational transformations of such companies as Allied Corporation, Apple Computer, General Electric, ABB, and Dupont closely reflect the incumbency and individual properties of their respective CEOs. Furthermore, whether or not managers actually do have profound impact upon organizational outcomes, managers act on their belief that they can affect their organizations; hence they attempt to shape organization designs, even though population ecologists (e.g. Hannan and Freeman 1984; Aldrich 1979) hold that such efforts are usually futile.

The literatures on agency theory (e.g. Fama 1980; Williamson 1975) and managerial hegemony (e.g. Kosnik 1987) have demonstrated that top managers are sometimes able to overcome environmental determinants in order to dominate their organizations. According to Romanelli and Tushman (1988), neither environments nor organizational inertia are strictly determining: top executives can, and do, influence organizational outcomes. Donaldson (1985) comments that strategic-choice theories that attribute design outcomes to individual-level factors such as attitudes do not negate deterministic arguments, but merely add psychological determinism to sociological determinism in the equation that drives organization design choices.