The impact of a CEO’s task knowledge on the leader life cycles

Master's Thesis, 2011

64 Pages, Grade: 1,0


Table of contents














Guided by the advancements of research on organizational learning, this thesis theoretically analyzes the impact of different dimensions of a CEO’s task knowledge on company performance over the CEO life cycle. For this purpose, it attempts to conceptualize the previously fragmented literatures on company/industry based, experience based and personality based task knowledge into an integrated concept of task knowledge within the leader life cycle theory. As a result of this, consistent hypotheses on the positive influence of higher task knowledge and the concrete impact on the shape of the leader life cycle curve have been derived. Conclusively, the thesis might play a pioneering role within the progression from a pure demographic characteristics based methodology to direct psychological personality measures of an executive’s cognitive base. The empirical validation deserves further attention.

Keywords: Leader life cycle theory; CEO life cycle; Task knowledge; Position- specific skills

Table of figures

Figure 1: CEO roles

Figure 2: An integrated model of CEO roles

Figure 3: Strategic choice under conditions of bounded rationality

Figure 4: An upper echelons perspective of organizations

Figure 5: Path model of modern upper echelon theory

Figure 6: CEO life cycle for stable Industries

Figure 7: The critical factors within the five seasons of a CEO’s tenure

Figure 8: The entire organizational knowledge influences the organizational outcomes

Figure 9: From cognitive constructs to observation

Figure 10: Deriving skills from the tasks of a CEO’s position

Figure 11: Integral view on the aspects of task knowledge

Figure 12: Influence of traditional task knowledge on the shape of the leader life cycle

Figure 13: Influence of integrated task knowledge on the shape of the leader life cycle

Figure 14: Predicted effects of CEO tenure on firm performance based on the (a) traditional notion and (b) integrated notion of task knowledge

Figure 15: Translating task knowledge into empirical variables

Table of abbreviations

illustration not visible in this excerpt

1 Introduction

Almost 20 years ago, Hambrick and Fukutomi revolutionized the CEO-research landscape by explaining a new framework to theorize an inverted curvilinear relationship between a CEO’s tenure in office and company performance, the seasons of a CEO’s tenure1. By doing so, they connected the behavioral CEO features like characteristics or organizational strategies with the temporal dimension of the executive's tenure during his CEO assignment lifecycle. Those few empirical studies, which have tested leader life cycle theory so far, have found general support for the theory’s view2, or at least by allowing for differences in long- or short- tenured leaders3. These studies have also shown, however, that the concrete shape of a leader life cycle is dependent on distinct variables. Hambrick and Fukutomi name a small number of factors that determine the exact structure of the life cycle, namely commitment to a paradigm, task knowledge, information diversity, task interest and power4. A CEO’s task knowledge as one of these factors, forms a crucial behavioral component in determining the exact shape of the leader life cycle and hence the relation to company performance. Strikingly task knowledge variables are broadly researched in upper echelons theory5 and organizational learning and leadership theories, but not in leader life cycle theory itself. Further, Wulf/ Stubner’s6 prognosticate that an incorporation of position- specific knowledge into executive succession research deserves further attention. Nevertheless, no one has yet examined a more fine grained approach to the impact of a CEO’s task knowledge within the leader life cycle. Without this, leader life cycle theory cannot be tested or validated holistically. Thus, it constitutes a necessity to shed light on this factor at the core of the theory, to better understand and to test the underlying mechanism.

(Aim) The aim of this thesis is to transfer strategy-CEO fit research, organizational learning research as well as leadership-based task knowledge research to the leader life cycle theory, and to explore the effect of position-specific skills of a CEO throughout the seasons of his tenure on company performance. Based on an organizational learning perspective, such a more fine-grained approach needs to analyze the underlying dimensions like organization and industry insiders/ outsiders phrased by Hambrick and Fukutomi7. Moreover, it will be essential to add further dimensions having been tested in the fields of organizational learning and upper echelon theories. Not stopping there, the composition of a holistic or integrated task knowledge factor, appropriate to be incorporated into leader life cycle theories, requires specific hypotheses on the impact of company performance. Addressing the question how different dimensions of task knowledge of a CEO influence company performance over his tenure in office, this thesis offers a highly relevant theoretical perspective in the context of the entire CEO life cycle8. The derivation of well-founded hypotheses and the determination of an appropriate empirical research setting will close an important research gap concerning the conceptualization of task knowledge in the leader life cycle theory. In short, the goal of this thesis is to theoretically analyze the impact of different dimensions of CEO’s task knowledge on company performance over the CEO life cycle.

(Structure) To achieve these research goals, the thesis is structured as following: First of all, it will be dwelled upon the derivation of typical CEO work roles based on activities to initiate the discussion about what a CEO’s tasks are. Further the theoretical foundations of the upper echelons theory contribute to this as a basis for the impact of a CEO on performance. Particularly, the performance during a CEO life cycle is then described by the leader life cycle theory. The depiction of the different seasons of a CEO’s tenure as well as the influencing factors, among them task knowledge, will explain the theoretical mechanisms. Additionally it will indicate the limitations of the leader life cycle as a theoretical base for explaining the impact on company performance.

Secondly, chapter three aims to theoretically approach, decipher and conciliate the different notions and facets of task knowledge. To achieve this, a basic understanding of knowledge from a psychological and organizational theoretical perspective will be briefly created to put task knowledge into its original context. Likewise, the motivation theoretical components of task knowledge in leadership theories are counseled, in which skills and knowledge are mostly modeled as traits or contingencies that can foster or indicate motivation or personality9. Based on these components characteristics of leader personalities skills useful for CEO jobs can be derived. This shall create an understanding of what task knowledge means, in what concepts it is used and which dimensions of it are relevant for incorporating them into a task knowledge factor of the leader life cycle theory. Hence the question about the origin of task knowledge and its influence on leaders is addressed.

Thereafter chapter four advances to the specific and in the recent scientific discourses not yet discussed topic of the impact of a CEO’s task knowledge on the leader life cycle. Therefore a theoretical construct of task knowledge in the leader life cycle will be drawn, which characterizes the influence of a leader’s task knowledge during the tenure. Concerning this construct, hypotheses based on the previous theoretical foundations will be constructed to present the impact of a CEO’s task knowledge on the company performance in detail. Furthermore this helps to illuminate the connection between CEO task knowledge and the general slope of the leader life cycle.

Chapter five concentrates on preparing the transition of the theoretical construct into an empirical test of the effect of task knowledge on the performance over the CEO life cycle. Hence general remarks are given on how to break down the influencing factors of the concept into variables that can be used in a regression. This will indicate several limitations and implications of the theoretical construct which will be further discussed in is chapter.

Finally, chapter six concludes that task knowledge, as a core factor within the CEO life cycle theory needs to be incorporated into a successful application and test of the theory to its full extent. Hence using the construct and its variables evaluated in this thesis can be recommended for further empirical and theoretical research on performance during the leader life cycle.

2 Theoretical foundations

2.1. A CEO’s tasks and roles

Starting with the endeavor to theorize on a company leader’s task knowledge on firm performance during the leader tenure, the role and the respective tasks of a leader or Chief Executive Officer (CEO), has to be defined upfront. At least since Peter Drucker’s 1954 book10, CEOs are described as managers and, in their position at the top of the firms hierarchy, nowadays especially as leaders11. Thus as the tasks a CEO performs and his required knowledge matter most for this thesis, no further distinction between managers and leaders is required. CEOs are seen as managers and leaders, or going with Mintzberg “leadership as management practiced weIl”12. Further, to specify what executives really do many researchers studied the nature of executive work and thus believe that the CEO occupies a distinct and unique role due to the nature of the position’s personal and organizational characteristics.

Their aim was to identify behavioral roles that characterize managerial work by observing, categorizing, and interpreting chief executive officers at work13. Sune Carlson was the first to empirically examine executive behavior in his book in 195114. Moreover, in the early 1970’s Henry Mintzberg initiated his research on defining a CEO’s job and specified ten management roles corresponding to a CEO’s job tasks. Other researchers like John Kotter conducted executive studies starting with his dissertation to explain behavioral patterns of mayors15 and later to, e.g. add leadership roles16 or better understand organizations. Likewise in Germany, Reichwald studied executive behavior from an information and communication technology perspective17. Recently Emilio Matthaei analyzed the research area in his doctoral dissertation18. And again it was Mintzberg, who reevaluated the job of managers by joining CEOs at work and tried to interpret the tasks and roles that one can derive out of these field experiences19. So far, looking at what a CEO really is, the Dictionary of Business Terms denotes him as the “officer who has ultimate management responsibility for an organization”20. This means that he e.g. appoints other managing directors of the company and is accountable directly to the company’s owners. This short definition explicates already the legal basis for CEO’s job which is set up in the respective business laws defining legal forms of companies. He thus is often seen as ultimately responsible and accountable for managing an organization’s strategy21.

Nevertheless, as the aim is to understand what kind of task knowledge managers need or shall have, their job tasks need to be understood more thoroughly. Beyond the legal basis, the mentioned above researchers of the so called Work Activity School mainly draw attention on CEOs job activities and the time distribution of these activities. They finally classify the roles which a CEO plays to fulfill his or her tasks during the activities to define the nature of executive work22. Looking at the CEO activities, researchers replaced managerial “folklore”23 or rhetoric like planning, organizing, coordinating and controlling by facts of what managers do. Mintzberg declares that managers work relentlessly on various brief, fragmented and disconnected, but action-oriented and mostly non routine tasks24. Chief executives hereby favor informal communication, like telephone calls, meetings and e-mail, but face increasing complexity through an overload of information spammed by others.25 This illustrates that managing lateral relationships among colleagues and associates as well as hierarchical relationships26 which allows the manager to exercise indirect control27, is a core task area in management.

The actual tasks that CEOs work on can be clustered and time distribution of the activities can be splitted based on different dimensions like the place of the CEO’s work, mode, subject or purpose of the activity or based on details of the contacts28. The important results of such an analysis, carried out by Matthaei are that in general most of a CEO’s work time is scheduled (60,8%) and most of this is spent on meetings (64,2%). With respect to the subject most of the appointments are related to organizing and planning activities (15,8%). Based on their purpose, activities are predominantly information related such as receiving, reviewing and giving information (35,4%). This is followed by decision making and strategy tasks as well as external board contact, organizational work and ceremonies29.

Such a dismantling of an executive’s activities and time is done by all researchers, for it enables them to derive work roles. They can be defined as organized behavioral sets belonging to the CEO position30. Researchers have not jet used these roles to construct broader theories of executive behavior31 ; they will be used here - as the most comprehensive available theoretical aggregates - to further deduce the relevant role or task knowledge. As none of them claims to be either complete or mutually exclusive and collectively exhaustive three different categorizations which are surely feasible and appropriate for this purpose will be introduced. They are composed in figure 1. The left list was also the first one and is rather written as task descriptions than concrete roles. They were formulated by Hemphill and e.g. used by Castaldi in 198632. Nevertheless the roles Mintzberg named in his dissertation in 1973 became the most popular ones. However, he revised them in 2009 in his new book on managing, declaring that managerial work is more dimensional than simply putting roles on a list. Finally Matthaei classified a CEO’s roles based on his studies of 29 CEOs and did this like Mintzberg in a person/ organization centered way by distinguishing his three main classes of operation, integration and networking roles33.

Figure 134

CEO roles

Abbildung in dieser Leseprobe nicht enthalten

An attempt to incorporate the thoughts of all three authors in one scheme is what figure 2 displays, which is however still mostly oriented on Mintzberg’s twodimensional matrix. Particularly his verbs used to describe the tasks, e.g. communicating, controlling, refer already to the skills that will be needed by a CEO to be successful. Together with Matthaei’s differentiation of the broader context of the job figure 2 seems to best incorporate a suitable tasks description to further ask for the relevant CEO knowledge. Emphasizing the “information” within the communication function is taken from Hempill and Matthaeis interpretations. “Future strategizing” stands for an important part of a CEO’s actual work on being responsible for the strategic direction of the company.

Figure 235

Abbildung in dieser Leseprobe nicht enthalten

Moreover, when talking about the nature of managerial work, one has to mention that even if CEOs are generally involved in the same type of activities, they will vary across job contexts, companies and industries. E.g. someone managing a consulting firm spends significant time on selling, likewise the chief executive at Boeing also needs to be a good sales person even though the job contexts are quite different36. For instance in manufacturing companies products are sold in little bits and pieces, so the chief executive job would not to sell products, but to facilitate venturing37. Even though the roles mentioned above describe idiosyncratic elements of a CEO’s job, it is difficult to identify systematic activities that cover all CEOs’ jobs38. Phrased differently, leaders will set their priorities and leadership styles also based on the environment. Conclusively this kind of environment-based task knowledge will be evaluated separately, because even Mintzberg himself has stated that research on managerial tasks and roles has yet failed to build a comprehensive model of managerial work.39 Likewise Hales in his 1986 review of some CEO observation studies highlighted the lack of theory development in this research area.

However, as tasks and managerial roles affect the directions of managers’ behavior based on their characteristics40, they can be used to draw the mechanisms of how managers influence company performance. More specifically this is also the starting point of how managers can outperform other managers over their lifecycle when being assigned roles that obtain their specific task knowlege. Those who have performed jobs and acquired the knowledge about certain roles will have an advantage in the future.

2.2. Upper echelon theory

Following the introduction of the CEO’s role and tasks, it might be asked why these investigations are important in a business context. As business performance is the result of sound overall company operations, it has long been discussed which influence a CEO would have - if at all - on such a defining success variable41. In 1984 Mason and Hambrick initially studied upper echelons to enquire “why organizations act as they do”42 finding that strategic decision makers can ultimately exert influence on strategy directions and hence company performance. Upper Echelon Theory argues that “organizational outcomes-both strategies and effectiveness are viewed as reflections of the values and cognitive bases of powerful actors in the organization”43.Towards this, three fundamental thoughts in their paper were that44

a. if one wants to understand why organizations do what they do, and why they perform in their way, one needs to understand the experiences, values, motives, and biases of the top executives;
b. the top-management team characteristics matter a lot to interpret organizational outcomes - it is not just the CEO;
c. intangible psychological properties and dispositions can be described by demographic characteristics e.g. tenure, functional background, and education can be used as partial indicators or proxies.

These arguments shall be elaborated further as especially c) is a strong reference point in the further CEO life cycle theory. Since then it was researched intensively, whether and to what extent a positive relationship of a CEO on a company performance could be identified45.

Historically the 1984 paper brought back chief executive managers or upper echelons into the theoretical frameworks of management scientists, which was before that largely shaped by the so called population ecologists’ view which assumed that organizations are bound by inertia and swept along by external forces leaving little influence for top management46. This seemed to be short sighted as the CEO usually is the organization’s most powerful actor and leader47. Hence Hambrick and Mason broke with this view of treating organizations as “quasi individuals”48 and created a theoretical framework that combines previous works from different research disciplines with regard to upper echelon characteristics49.

As such, the theory is built on the premise of bounded rationality of the most powerful actors believing that behavioral factors and idiosyncrasies of decision makers will influence results more than finding the right microeconomic optimization mechanism50. Thus each decision maker brings his cognitive base to an administrative situation, which consists of “knowledge or assumptions about future events, knowledge of alternatives, and knowledge of consequences attached to alternatives”51. Figure 3 represents this scheme, highlighting the locus of this kind of task knowledge.

Figure 352

Strategic choice under conditions of bounded rationality

Abbildung in dieser Leseprobe nicht enthalten

The values and cognitive basis of a CEO are powerful factors influencing the organization. In this thesis it is added that both are largely shaped by the task knowledge as indicated by the red shaped box. Phrasing it differently the upper echelon characteristics will to a large extent also contain dimensions of task related knowledge. Mason and Hambrick explain that depending on an executive’s cognitive base and his values53, which are expressed by the so-called upper echelons characteristics, he will have a restricted field of vision and only selectively perceives the situation he is exposed to. The individual interpretation of the situation, filtered by the background characteristics, leads to his own managerial perception that will be the basis for his strategic decision54. As the arrows indicate, his cognitive base and values will have both, a direct and a mediated effect on company performance. The model hence tries to explain the unique biases and dispositions of top executives under uncertainty and link them as relevant to organizational performance55.

Figure 456

An upper echelons perspective of organizations

Abbildung in dieser Leseprobe nicht enthalten

Figure 4 elucidates the general upper echelon mechanism. The objective in and external situation of the organization is interpreted by the upper echelon based on his psychological and observable characteristics. They influence performance directly and indirectly; indirectly due to the strategic choices that also are shaped by the characteristics. The specifications in the boxes of Figure 4 hence lay out the research design naming observable indicators which can be used as variables to empirically test the theory - which has been done comprehensively to date. 23 years later, in his 2007 update of upper echelon theory, Hambrick notes that researchers have found substantial evidence to support the relationship between many characteristics and strategic decisions and firm performance outcomes57. An earlier review from 2004 concludes that the validity of the upper echelon model has shown to hold within various business settings, strategic choice options and performance metrics58.

Part of the success of Upper echelon theory was the approach to test the association between the observable characteristics of top executives - which to a large extend are influencing a CEO’s task knowledge, as will be shown later -and organizational characteristics59. It has to be acknowledged specifically that Hambrick and Mason propose these variables to empiricalize and thus explain complex psychological and cognitive processes60. Nevertheless critics argue that due to the individual differences in the cognition of CEOs individual beliefs should be rather measured directly, not proxied by demographics characteristics as substitutes which are seen as too "rough surrogates"61.

Conclusively, mainly due to the impracticability of direct belief measures62, many researchers followed the approach of indicating psychological beliefs by observable characteristics. Variables like tenure, education level, and functional background, have shown to represent valid proxies for their cognitions, skills, and values as they powerfully explain for variations in their strategic choices63. The reasoning behind age or tenure was that youthful managers were associated with corporate growth64. Functional track is generally assumed to proxy the experience someone brings in from his primary functional area. Other career experiences would likewise have a significant effect on the types of actions a CEO takes. Formal education yields to some degree the breadth of an executive’s knowledge and skill base. Socioeconomic backgrounds are often used as distinguishing characteristics in demographic studies and hence those of senior executives are also assumed to affect their actions. Finally the effect of a CEO’s financial position i.e. due to stock ownership as well as the effect of top management team composition65 on company performance has been studied at length by researchers in the field.

In a second stage of upper echelon research many scholars tried to explain belief based theoretical constructs by the proposed upper echelon characteristics and then draw based on these constructs conclusions about the changes in organizational outcomes66. During this process mediating and moderating variables like how much managerial discretion exists or what an executive’s job demands, draw straightforward implications for upper echelons theory67. Likewise, Finkelstein’s methodology for measuring executive power was comprehensive and well validated68. Other research streams analyzed the effect of given incentives, team integration, and team processes as moderating variables69. Figure 5 merges some of these insights by presenting a modern path model of upper echelons theory.


1 See Hambrick/ Fukutomi (1991).

2 See Miller/ Shamsie (2001); Giambatista (2004); Henderson/ Miller/ Hambrick (2006).

3 See Wulf et al. (2010), p. 19.

4 See Hambrick/ Fukutomi (1991), p. 723.

5 See Hambrick/ Mason (1984), p. 198.

6 See Wulf/ Stubner (2008), p. 32.

7 See Hambrick/ Fukutomi (1991), p. 725.

8 It partially builds upon Wulf/ Stubner (2008)’s contribution on some aspects of position-specific knowledge in the context of a CEO succession.

9 See Robbins/ Judge (2009), p. 88 (learning), p. 136 (personality), p. 249 (job characteristics).

10 See Drucker (1954).

11 See Mintzberg (2009), p. 1.

12 See ibid., p. 9.

13 See Dargie (2000), p. 41.

14 See Matthaei (2010), pp. 50-51; Carlson (1951).

15 See ibid., pp. 66-67.

16 See Kotter (1990), p. 82.

17 See Beckurts/ Reichwald (1984).

18 See Matthaei (2010), pp. 17-73.

19 See Mintzberg (2009), p. 17.

20 Friedman (2007).

21 See Jaw/ Linb (2009), p. 222.

22 See Matthaei (2010), pp. 40-8; Mintzberg (2009), p. 48.

23 Mintzberg (1989).

24 See Mintzberg (2009), p. 19; See Jaw/ Linb (2009), p. 221.

25 See Mintzberg (2009), p. 25.

26 See Mintzberg (2009), p. 29; Matthaei (2010), p. 177.

27 See Mintzberg (2009), p. 32.

28 See Matthaei (2010), pp. 110-18.

29 See ibid., pp. 119-20.

30 See Castaldi (1986), p. 54.

31 See O’Gorman/ Bourke/ Murray (2005), p. 3.

32 See Hemphill (1960), p. xiii; Castaldi (1986), p. 54.

33 See Matthaei (2010), p. 177.

34 Own graphic; according to the authors named.

35 Own composition.

36 See Kesner/ Sebora (1994), p. 335.

37 See McCarthy (2000), p. 38.

38 See Jaw/ Linb (2009), p. 221.

39 See Mintzberg (1994); O’Gorman/ Bourke/ Murray (2005), p. 3/7.

40 See Hackman (1969), p. 436.

41 See Mackey (2008), p. 1357.

42 Hambrick/ Mason (1984), p. 193.

43 Hambrick/ Mason (1984), p. 193; See Kauer (2008), p. 17; Manner (2010), p. 55.

44 See for this and the following Cannella (2001), pp. 37-8; Nishii/ Gotte/ Raver (2007), p. 3.

45 See Michl et al. (2010), p. 85.

46 See Cannella (2001), p. 37.

47 See Wu/ Levitas/ Priem (2005), p. 859.

48 See Kauer (2008), p. 17.

49 See Manner (2010), p. 55.

50 See Hambrick/ Mason (1984), p. 194.

51 Hambrick/ Mason (1984), p. 195.

52 See Hambrick/ Mason (1984), p. 195; - red box added. Task knowledge is placed between the cognitive base and the values, as beliefs and assumptions about the future are often value driven.

53 And here specifically his task knowledge is meant.

54 See Manner (2010), p. 55.

55 See Kauer (2008), p. 17; See Hambrick (2007), p. 334.

56 See Hambrick/ Mason (1984), p. 198; gray box added by Michl et al. (2010), p. 86; - red box added.

57 See p. 335; See Manner (2010), p. 56; Patzelt/ zu Knyphausen-Aufseß/ Nikolw (2008), p. 205.

58 See Carpenter/ Geletkanycz/ Sanders (2004), p. 774.

59 See Manner (2010), p. 56.

60 This thesis follows this approach to theoreize on task knowledge.

61 Markoczy (1997), p. 1239. Markoczy however also claims in her 2004 paper on cooperation that grand and broad theories with little predictive power and less empirically proveable mechanisms have an intrinsic value as they add „understanding“ - leaving open how this may be veryfied. Nevertheless the model proposed by Markoczy and Goldberg 1995 is worth to be considered.

62 See Hambrick (2007), p. 337.

63 See Manner (2010), p. 55; Jaw/ Linb (2009), p. 222; Nishii/ Gotte/ Raver (2007), p. 3; Hambrick (2007), p. 335.

64 See for this and the following Hambrick/ Mason (1984), pp. 198-202.

65 As the sole focus is the CEO, only little to no attention will be paid to these “out of scope” factors.

66 See Carpenter/ Geletkanycz/ Sanders (2004), p. 759; or exemplary Nishii/ Gotte/ Raver (2007), p. 12; Seaton/ Boyd (2010), p. 74; Jaw/ Linb (2009), p. 229; Reutzel/ Belsito (2010), pp. 11-12.

67 See Hambrick/ Finkelstein (1987), pp. 378-379; Hambrick/ Finkelstein/ Mooney (2005), p. 472; Hambrick (2007), p. 335; Chaganti/ Sambharya (1987), p. 394.

68 See Hambrick (2007), p. 335.

69 See Carpenter/ Geletkanycz/ Sanders (2004), p. 760.

Excerpt out of 64 pages


The impact of a CEO’s task knowledge on the leader life cycles
HHL Leipzig Graduate School of Management  (Chair of Strategic Management and Organization)
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ISBN (Book)
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The thesis won a prize, donated by the KARL KOLLE Foundation and worth EUR 1,000, honored to the underlying academic excellence in strategic management.
ceo’s, Leader life cycle theory, Organizational Research, Management Research, Leadership, Personality
Quote paper
Stefan Frisch (Author), 2011, The impact of a CEO’s task knowledge on the leader life cycles, Munich, GRIN Verlag,


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