Culminating events and time working together in top management teams

Culminating events and time working together in top management teams

Top management teams (TMTs) – comprising the most influential executives in an organization – are important because of their influence over strategic choices and performance. Prior studies have shown that TMT characteristics such as age, education, and functional background affect performance. However, we have still a limited understanding of how top executives learn to work in team and make strategic decisions that are typically rare.

Culminating events: what are they?

Specifically, existing research has paid particular attention to study the link between the joint experience that TMT members accumulate and the performance of their decisions. However, previous studies have overlooked something important: TMTs are simultaneously engaged in a diverse array of decision types. Some occur frequently (e.g., the periodic evaluation and assignment of resources to business units); others, such as Mergers and acquisitions (M&As) or direct investments to enter new geographic areas, are relatively rare. In this latter case, performance is the result of a rare event that is itself the culmination of a long and ongoing process of daily decision-making. We call these decisions “culminating” events – that is, decisions that happen rarely, but are the outcome of a prolonged period of frequent, deliberate, and related decision-making activities. Several strategic decisions are often culminating events that are relatively rare and, therefore, do not allow TMTs to acquire experience through the frequent repetition of these decisions.

When rare decision events are the culmination of an ongoing decision-making process, we propose that the time that each pair of TMT members spends working together to arrive at those events – defined as Time Working Together – is more important than the total number of culminating events that have taken place – what it is usually called Experience Working Together.

Our results suggest that performance is hampered when a TMT has spent limited amounts of time working together. However, our results further suggest that, over time, the gradual accumulation of interpersonal interactions and joint work increases a TMT effectiveness and coordination, leading to better decision-making and, in turn, enhanced performance.

Findings also indicate that the relationship between the time spent working together and performance is affected by factors within the team and in the proximate organizational context. TMT functional heterogeneity – by decreasing coordination, communication, and information exchange – hampers the positive impact of time working together on performance. In contrast, the size of the team assisting the TMT enhances the impact of time spent working together on performance.

Practical implications for managers

This study has practical implications for managers involved in strategic decision-making. In particular, our results point to the potentially negative impact on the performance of joint work among members of “young” TMTs who have had spent limited time working together. To reduce the risk of poor decisions, managers should pay attention to both team composition and the number of people assisting the TMT. The heterogeneity of the decision-making group appears to negatively affect the quality of a TMT’s decisions. Our analysis suggests that firms should be aware of the consequences of more heterogeneous teams on TMT coordination and effectiveness.

Moreover, findings show that having a larger team assisting the TMT may increase the quality of decision making by reducing the likelihood that TMT members will erroneously assess information related to their decisions. This result suggests that the size of the team assisting the TMT should be increased beyond the immediate requirements of coordination and execution, within the boundaries of resource availability and work efficiency. The reason is that, whereas assisting teams do not have any direct impact on performance, they likely increase the benefits derived from time spent working together in the TMT.


The joint experience of TMT members positively affects firm performance. Our study built on this notion by examining linkages among the time that TMT members spent working together (TWT), the heterogeneity of the TMT, the size of the team assisting the TMT, and performance.

Overall, this study suggests that the performance of each culminating event is not a function of the number of previously completed decisions (i.e., experience) but is, in fact, a function of the accumulation of daily decision-making (i.e., time spent working together) that may or may not culminate in the actual decision.

Time working together in Private Equity (PE)
TMTs in PE firms are an excellent context for investigating managerial decision-making in which frequent TMT interactions lead to rare decision events. PE-sector TMT members engage in extended periods of daily decision-making that culminate in a small number of rare decision events: executing equity investments in their portfolio companies – called buyouts – in order to resell their ownership share at a profit. PE firms are important actors in the M&A market because in many countries they now account for one quarter of the total merger and acquisition activity of all firms.
Because PE firms follow very stringent investment criteria, they make very few investments throughout their life and each decision to invest (or not) is the culmination of a large number of daily decision-making activities. Indeed, to make a single investment, executives at a median-sized PE firm review 80 potential investments, hold 20 meetings with the management teams of potential targets, start four negotiations, and conduct three due diligences. This means that the median private equity firm spends 80% of its man-hours on deals that do not close.
In sum, in the PE context, whereas an actual investment is rare, the activities related to assessing potential investments are not. Therefore, a PE firm and its management team accumulate experience about the investment process even in the absence of an actual investment. The scarcity of actual investments in the PE context calls for a better understanding of how investment teams learn to work together when events are rare.

Castellaneta, F., & Salvato, C. (2017). Culminating events and time working together in top management teams: Insights from private equity. Long Range Planning, in press: 1-16 (DOI: 10.1016/j.lrp.2017.08.006).

Francesco CastellanetaProfessor of Strategy and Entrepreneurship, KTO Research Centre, SKEMA Business School - University Côte d'Azur, France, GREDEG

All author's posts

Carlo SalvatoProfessor of Management at Bocconi University, Italy

All author's posts

Close Menu