Top Management Team Heterogeneity and Performance of Large Food and Beverage Manufacturing Firms in Kenya

Abstract

The top management team (TMT) influences the actions and outcomes of the organization. The TMT‟s characteristics influence the choice of strategies which affect performance thus strategies mediate the relationship between the TMT and firm performance. This relationship was evaluated through the competitive repertoire which is the complete array of competitive strategies adopted by an organization. Organizations adopt heterogeneous TMTs to acquire a wide variety of skills and attributes which can be applied for superior strategy development thus TMT heterogeneity is associated with competitive repertoire complexity. However, TMT heterogeneity can stir conflicts and factions among the TMT which would be detrimental to the firm. TMT heterogeneity therefore affects group cohesion which affects firm performance thus group cohesion mediates the effect of a heterogeneous TMT on firm performance. This study sought to determine the effect of group cohesion and competitive repertoire complexity on the relationship between TMT heterogeneity and performance of large food and beverage manufacturing firms in Kenya. The specific objectives were to establish the effect of TMT heterogeneity on performance, to assess the effect of group cohesion on the relationship between TMT heterogeneity and performance, to evaluate the effect of competitive repertoire complexity on the relationship between TMT heterogeneity and performance and to determine the joint effect of TMT heterogeneity, group cohesion and competitive repertoire complexity on the performance of large food and beverage manufacturing firms in Kenya. A cross sectional descriptive survey was conducted among 53 large food and beverage manufacturers. Primary data and secondary data were collated through a structured questionnaire and checklist respectively. The hypotheses were tested through regression analysis with the Baron and Kenny model was adopted to test the mediating effects. The study established that TMT heterogeneity had a significant negative effect on financial (p = 0.046, B = -1.666), internal processes (p = 0.026, B = -3.006) and social performance (p = 0.021, B = -4.063) which was in line with the upper echelons theory. Group cohesion significantly mediated the relationship between TMT heterogeneity and financial (p = 0.018), internal processes (p = 0.004) and social (p = 0.018) performance consistent with the self categorization theory. Competitive repertoire complexity was not associated with TMT heterogeneity (p = 0.369 and p = 0.877 for repertoire concentration and range respectively) and did not significantly mediate the relationship between TMT heterogeneity and firm performance as anticipated from the information processing theory. TMT heterogeneity, group cohesion and competitive repertoire range had a significant joint effect on financial (p = 0.004), customer (p = 0.018), internal processes (p = 0.001), learning and development (p = 0.026) and social (p = 0.021) performance while TMT heterogeneity, group cohesion and competitive repertoire concentration had a significant joint effect on financial (p = 0.03), internal processes (p = 0.009) and social (p = 0.042) performance which supported the resource based view. This study contributed to the strategic management field by demonstrating that TMT heterogeneity was harmful to firm performance unless the TMT was cohesive. Policy makers and practicing managers would benefit by careful consideration of their policies and efforts in designing heterogeneous TMTs and fostering cohesion among them and being deliberate in strategy development and choice. The study was limited by data availability and unwillingness of the respondents to participate and suggested that future studies could adopt different research designs and study contexts.