See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/254223180

Chief executive leadership style, consensus decision making, and top

management team effectiveness

Article  in  European Journal of Work and Organizational Psychology · September 2000

DOI: 10.1080/135943200417984

CITATIONS READS

71 4,051

6 authors, including:

Patrick C. Flood Ken G. Smith

Dublin City University University of Maryland, College Park
120 PUBLICATIONS   3,537 CITATIONS    86 PUBLICATIONS   19,242 CITATIONS   

SEE PROFILE SEE PROFILE

Michael A. West Jeremy F. Dawson

Lancaster University The University of Sheffield
278 PUBLICATIONS   25,942 CITATIONS    110 PUBLICATIONS   9,520 CITATIONS   

SEE PROFILE SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Innovation at work View project

Predicting Recovery After Mild Traumatic Brain Injury View project

All content following this page was uploaded by Patrick C. Flood on 14 December 2013.

The user has requested enhancement of the downloaded file.

EUROPEAN JOURNAL OF WORK
CEO AND ORGANIZATIONAL
LEADERSHIP PSYCHOLOGY,
STYLE AND TEAM 2000, 9 (3), 401–420
EFFECTIVENESS 401

Chief executive leadership style, consensus decision

making, and top management team effectiveness
Patrick C. Flood
College of Business, University of Limerick, Ireland
Eithne Hannan
Institute of Work Psychology, University of Sheffield, UK
Ken G. Smith
R.H. Smith School of Business, University of Maryland at College Park, USA
Thomas Turner
Department of Personnel and Employment Relations,
University of Limerick, Ireland
Michael A. West and Jeremy Dawson
Aston Business School, University of Aston, Birmingham, UK and
Centre for Economic Performance, London School of Economics, UK

Using data from 79 high technology firms in the US and Ireland this study
concludes that leadership style has both direct and indirect relationships with
consensus decision making and with the reported effectiveness of top management
teams. It focuses on what effective leaders do rather than the individual traits they
possess and distinguishes between four styles of leadership: authoritarian
(characterized by the use of instruction and non-contingent reprimand),
transactional (influence via exchange of valued rewards for services/behaviours),
transformational (inspiring followers to do more than originally expected), and
laissez faire (avoiding decision making and supervisory responsibility). The trans-
formational style of leadership was significantly and positively related, and the
laissez faire style was significantly negatively related to reported team

Requests for reprints should be addressed to P.C. Flood, College of Business, University of
Limerick, Plassey Technological Park, Limerick, Ireland. Email: patrick.flood@ul.ie
The authors wish to acknowledge the contribution of Ken A. Smith, Sarah Moore, Mike
Morley, Judy Olian, Phillip O’Regan, Judy Scully, and Henry P. Sims in the design and execution
of this study. Funding for this study was kindly provided by the Dingman Centre for
Entrepreneurship at the R.H. Smith School of Business, University of Maryland at College Park
and the University of Limerick Foundation through the office of Dr Noel Whelan.

© 2000 Psychology Press Ltd

http://www.tandf.co.uk/journals/pp/1359432X.html
402 FLOOD ET AL.

effectiveness. Authoritarian and transformational leadership also predicted con-

sensus decision making in the top management groups, the former negatively and
the latter positively. Finally, consensus decision making emerged as a significant
predictor of perceived team effectiveness. Directions for future research and the
practical implications of the findings are discussed.

Most research on the effects of top management groups on organizational

characteristics has focused on group composition, with relatively little work
focusing on how other aspects of the group such as leadership affect the rest of
the organization (Finkelstein & Hambrick, 1996; Flood, MacCurtain, & West,
2000). Yet the CEO is a central member of the top management group who has a
disproportionate impact on team characteristics and outcomes (Finkelstein,
1992). Although some researchers have argued that leaders and top management
teams have little impact on organizational outcomes (Aldrich, 1979; Ashley &
Van de Ven, 1983; Lieberson & O’Connor, 1972), the emerging view from more
recent research suggests otherwise (Finkelstein & Hambrick, 1990; Flood et al.,
1997; Hambrick & Mason, 1984; Romanelli & Tushman, 1986). According to
Hambrick and Mason’s (1984) “upper echelons” theory, higher level managers
have an important impact on organizational outcomes because of the decisions
they are empowered to make.
The top management group (TMG) refers to the relatively small group of most
influential executives at the apex of the organization—that group of top
executives with overall responsibility for the organization (Mintzberg, 1979).
The primary focus of the majority of studies of such groups has argued that
characteristics of the TMG influence the strategic decision-making process and
resultant organizational outcomes of strategy and performance. Hambrick (1994)
argues that this emphasis on the “team” aspect of the dominant coalition leads
researchers on top management teams to ignore the role of the CEO. The
movement towards executive-level teams raises major questions about the role
and management style of this central figure. There has been a tendency to simply
include the CEO as a member of the group, averaging in his/her characteristics in
establishing overall group characteristics (Jackson, 1992), yet everyday obser-
vation and a wealth of related literature indicates that the top group leader has a
disproportionate, sometimes dominating influence, on the group’s various
characteristics and outputs (Finkelstein, 1992). This shift in focus is unfortunate
as clearly the CEO occupies a position of unique influence in the firm (Pfeffer,
1992; Roth, 1995; Vance, 1983) and the extent of this influence is still not fully
understood (Finkelstein & Hambrick, 1996).
There is some though limited research evidence that leaders affect team
effectiveness (West, Borrill, & Unsworth, 1998). The purpose of this article is to
investigate the extent to which the leadership style of the CEO is associated with
the decision-making process within the top management group and to assess in
turn the relationship of CEO leadership with team effectiveness.
 CEO LEADERSHIP STYLE AND TEAM EFFECTIVENESS 403
TEAM LEADERSHIP AND TEAM EFFECTIVENESS
Leadership theory (Conger & Kanungo, 1987; Day & Lord, 1988; Gioia & Sims,
1985; House, Spangler, & Woycke, 1991; Howell & Avolio, 1993; Manz &
Sims, 1991; Scully, Sims, Olian, Schnell, & Smith, 1994; Waldman, Bass, &
Yammarino, 1990) suggests that leadership behaviour has profound effects on
subordinates, including how they relate both to the leader as well as to each other
(Bass, 1990). The leadership styles studied here are based on this behavioural
perspective.
Bass (1990) described four main styles of leadership as transactional,
transformational, empowering, and directive (authoritarian), where the first three
are “egalitarian” in nature. Egalitarian leadership behaviour has been associated
with teamwork (French, Morrison, & Leoinger, 1960) and empowerment, as well
as having effects on communication patterns within the team (Kirmeyer & Lin,
1987).

Authoritarian leadership. Hambrick and D’Aveni (1992) found that the

presence of an autocratic CEO impairs the quality of information processed,
since other team members tend not to assert their positions. Exchange of
information is hampered by the social distance between the CEO and the rest of
the team, as well as by the penalties for reporting information or ideas that run
counter to those preferred by the autocrat (Miller & Friesen, 1977). Hambrick
and D’Aveni found that possibly the most widely observed characteristic of
failing top management teams was the presence of dominant CEOs or autocrats.
Argenti (1976), Miller and Friesen (1977), and Ross and Kami (1973) all found
evidence of strong-willed, dominating chief executives at the helms of un-
successful firms (Hambrick & D’Aveni, 1992).

Transactional leadership. Burns (1978) describes the transactional leader as

one who influences others by appealing to their self-interest primarily through
the exchange of valued rewards for services or other desired behaviours. The
relationship between the leader and the follower is seen as a series of rational
exchanges that enable each to reach their goals (Bass, 1990). Transactional
leaders use rewards as their primary source of power. Followers comply with the
leader when the exchange (i.e., the reward) meets the followers’ needs. The
relationship continues as long as the reward is desirable to the follower, and both
the leader and the follower perceive the transaction as a means of progressing
towards their personal goal (Bass, 1990).

Transformational leadership. Whereas the transactional leader motivates

subordinates to perform as expected, the transformational leader typically
inspires followers to do more than originally expected (Den Hartog, Van Muijen,
& Koopman, 1997). Authentic transformational leaders motivate followers to
404 FLOOD ET AL.

work for goals that go beyond immediate self-interests, where what is right and
good to do becomes important (Bass, 1997). Transformational leaders motivate
followers and other constituencies to do more than they originally expected to do
as they strive for higher order outcomes (Burns, 1978).

Laissez faire leadership. Both transformational and transactional leaders

are active leaders. When researching these two active forms of leadership, they
are often contrasted with the extremely passive laissez faire leadership. The
laissez faire leader avoids decision making and supervisory responsibility (Den
Hartog, Van Muijen, & Koopman, 1997).

LEADERSHIP, CONSENSUS DECISION MAKING,

AND TEAM EFFECTIVENESS
Most studies of group dynamics are based on the premise that group behaviours
intervene between group composition and group outcomes (Shaw, 1981;
Stogdill, 1959). Smith et al. (1994) proposed that TMG composition influences
organizational outcomes primarily through TMG processes and that these pro-
cesses directly impact organizational outcomes. This is consistent with the
framework proposed by Gist, Locke, and Taylor (1987) that group composition
influences processes that ultimately impact on organizational outcomes. Where
consensus decision making is utilized team members will feel that they are part of
the decision-making process (West, Borrill, & Unsworth, 1998). This in turn will
encourage co-operation in the implementation of such decisions.
Top management groups make strategic decisions, the quality of which
influences organizational performance. As consensus among team members
facilitates the implementation of those decisions, consensus also influences
organizational performance (Amason, 1996). Thus, decision processes pro-
moting consensus among team members are more likely to enhance organi-
zational performance than decision processes that do not promote consensus
(Amason, 1996; Bourgeois, 1980; Dess, 1987; Dess & Origer, 1987; Guth &
MacMillan, 1986). Consensus decision-making processes have been defined as
those processes that encourage and facilitate participation by, and agreement
among, group members (Knight et al., 1999).
Studies comparing the results of consensual decision making with other
decision processes have consistently shown that groups employing consensual
decision making generally have greater levels of agreement (i.e., consensus) and
member satisfaction than those groups using other decision-making techniques,
such as dialectical enquiry or devil’s advocacy (Knight et al., 1999). According
to Finkelstein and Hambrick (1996), CEO dominance reduces the degree of
consensus achieved in reaching strategic decision. Eisenhardt and Bourgeois
(1988) found that where CEOs were less dominant, there was greater sharing of
information, the team maintained a collaborative viewpoint, co-operative
 CEO LEADERSHIP STYLE AND TEAM EFFECTIVENESS 405
behaviour focused on group rather than individual goals and the decision process
was described as “consensus style” (Eisenhardt & Bourgeois, 1988). Conversely,
power centralization was associated with a high degree of political activity within
TMGs in Eisenhardt and Bourgeois’ (1988) study. They found that dominant
CEOs transformed a collaborative situation into a competitive one, and politics
emerged as people competed for the time and attention of the CEO (Eisenhardt &
Bourgeois, 1988). The study described here is concerned with investigating
whether CEO leadership styles influence consensus decision making within the
TMG together with the consequent impact on reported team effectiveness.

DETERMINANTS OF TEAM EFFECTIVENESS:

THREE MODELS COMPARED
Guzzo and Shea (1992) believe that the dominant way of thinking about group
performance reflects an input–process–output model. They include in inputs the
things group members bring to the group, including expertise, status, personality
attributes, abilities, experience, and demographic attributes. In the model out-
lined below, the main input variable is leadership style. Process, according to
Guzzo and Shea (1992) includes the interaction among group members, typically
including social exchange of information, influence attempts, and expressions of
approval or disapproval of fellow group members. In our model we focus on the
consensus decision-making process. Output includes the products yielded by
groups, in this case measured as reported perceptions of team effectiveness.
Three possible explanations of the factors associated with team effectiveness are
depicted in Figure 1.
Firstly, leadership style is predicted to have a direct impact on reported team
effectiveness. Drawing on the extant literature we would expect the authoritarian
and laissez faire style of leadership to have a negative effect on team members’
perceptions of team effectiveness. Laissez faire leaders give so little sense of

Figure 1. Hypothesized relationships between leadership style, consensus decision making and
team effectiveness.
406 FLOOD ET AL.

coherent direction and strategic focus that team members are unlikely to perceive
team functioning in a positive light. An authoritarian style is unlikely to be
suitable to the fast-paced environment faced by the teams under consideration in
this article who work in a high velocity environment. Additionally, team
members are unlikely to cohere well under an authoritarian leader. We could
expect more positive effects for leaders displaying transactional or
transformational leadership styles. Transactional leadership might, through the
process of social exchange, produce a cohesive team. In turn the associated
improvement in team climate might produce positive perceptions of team
effectiveness. Transformational leaders through their continuous activity in
uniting team members around a team vision can be expected to promote team
effectiveness.
Secondly, consensus decision making is posited to have a direct impact on
perceptions of team effectiveness. When acceptability is enhanced through
consensus decision making it is likely to improve implementation, which is a key
criterion of perceived effectiveness of the team.
Thirdly, it is predicted that leadership style will impact on perceptions of team
effectiveness via the group process of consensus decision making. The effect of
leadership style on team effectiveness will be mediated by decision-making
processes.
In summary, we propose that leadership style impacts directly upon the way in
which leaders choose to influence team decisions. One powerful indicator of a
leader’s style is how frequently they consult with fellow top team members to
generate consensus in strategic decision making.

Method
The sample for this study consisted of the TMTs of 83 high technology firms
located in the mid-Atlantic region of the US and a group of subsidiaries of US
multi-national firms operating in Ireland. Data were derived from CEO
interviews and questionnaire surveys of members of the top management team at
each company. The companies included in the sample were involved in a variety
of technology-related businesses including information technology, research
(biotechnology and aerospace), hazardous waste management, and defence.
The US sample contained 56 companies from 114 originally contacted. An
almanac profiling high-tech or technology-intensive firms that were part of a
technology and research and development consortium was the original source
used to identify the firms. Forty-seven firms were dropped from the sample after
initial contacts for a variety of reasons, including unwillingness to participate,
mistaken identification (e.g., were low technology), mergers, diversification, or
because the firm had gone out of business. Interviews were conducted with the
CEOs of the remaining 67 firms (an initial response rate of 59%).
 CEO LEADERSHIP STYLE AND TEAM EFFECTIVENESS 407
The personal interviews served two purposes. First, it allowed the researcher
to explain more fully the goals of the study and to obtain the CEO’s approval and
endorsement of the study. The study design called for the CEO to identify each of
the team members and for each team member to complete a questionnaire.
Second, as part of the interview, the CEO was asked to send a memo to each top
management team member, requesting participation in the study and endorsing
the study, increasing the likelihood of participation.
Usable responses were received from 79% of the CEOs interviewed in the
final population (47% of those originally selected). The size of companies in the
sample, measured in gross sales, ranged from $200 thousand to $162 million.
Mean sales were $29 million, with a standard deviation of $32.5 million and a
median of $17.8 million. The mean size of firms in number of employees was
357, with a standard deviation of 395, while the median number of employees
was 225.
The companies that did not participate in the study were involved in similar
kinds of businesses as the firms included in the final sample. A one-way analysis
of variance on gross sales indicated that responding firms were not significantly
different from non-responding firms in terms of size, F = 1.85, p < .18, N = 114.
To closely approximate Cyert and March’s (1963) notion of the dominant
coalition, we asked each CEO to identify the members of his or her “real” top
management team. Of those identified, 78% were also officers of the corporation.
All members of the top management team, including the CEO, were asked to
complete questionnaires. From the questionnaires requested from team members,
a total of 353 usable responses were returned. Eighty per cent of the team
members who were asked to complete the questionnaire did so, and the average
number of questionnaires returned per firm was 4.5. Some 12% of respondents
were female and the mean age of respondents was 44 years (SD = 9.54). In the
Irish sample, 60% of the companies contacted agreed to participate, yielding a
final sample of 26 companies. From these 26 companies, 98 usable question-
naires were returned (approximately 3.77 per firm). Combining the samples
resulted in an overall response rate of 45% across both subsamples including 83
companies, 79 of which provided complete data.

Hypotheses
In this paper we test the following three hypothesized relationships:

Hypothesis 1. Leadership style is predicted to have a direct impact on

reported team effectiveness.

Hypothesis 2. Consensus decision making is posited to have a direct impact

on perceptions of team effectiveness.
408 FLOOD ET AL.

Hypothesis 3. Leadership style will impact on perceptions of team

effectiveness via the group process of consensus decision making.

Authoritarian, laissez faire and transactional leadership are hypothesized to

have a negative effect on consensus decision making and on reported team
effectiveness. Transformational leadership is proposed to have a positive
relationship with consensus decision making and on reported team effectiveness.
Consensus decision making is hypothesized to have a positive relationship with
perceived effectiveness of the team.

Measures
Leadership variables. Leadership style was measured on four dimensions
(authoritarian, laissez faire, transactional, and transformational) using Likert-
type questionnaire items (5-point scale). In developing our leadership scales we
drew heavily on the work of Scully et al. (1994).
Direct-report subordinates of the CEO (i.e., members of the TMT as
designated by the CEO) completed the leader measures of leadership style. The
Appendix shows the items and reliabilities of all the leadership-style scales; all
reliabilities are well over the acceptable level, ranging from .82 to .97). To
address convergence of team perceptions of their leader’s behaviours, one-way
analyses of variance (ANOVAs) were conducted, with company as the
independent variable and each of the leadership styles as dependent variables. A
significant F-value indicates that between-firm variance is greater than
within-firm variance. These analyses yielded significant F-ratios for all but one
leadership style, laissez faire, F = 1.247, p = 0.11. In addition, we computed the
rwg(j) coefficient for inter-rater reliability for the leadership variables (James,
Demaree, & Wolfe, 1984). The rwg(j) represents within-group agreement. The
rwg(j) values were as follows: authoritarian leadership = 0.73, laissez faire =
0.71, transformational leadership = 0.74. All rwg(j) scores are above 0.70, which
is commonly accepted as a satisfactory level of agreement.
As a check on the factor structure of the measures, confirmatory factor
analysis was used to compare a four-factor model with a one-factor model.
A one-factor model produced a chi-squared value of 4925.8, with 779 degrees
of freedom. The four-factor model produced a chi-squared value of 2993.7, with
773 degrees of freedom. Root mean square error of approximation was 0.104,
and the comparative fit index was 0.733. This is not an excellent fit but clearly
indicates the superiority of the four-over the one-factor model.

Group process variables. Consensus decision making has been identified as

an important factor in top management team functioning (Knight et al., 1999) and
is the principal group process measure assessed in this research. Consensus
decision making was measured using a four-item, Likert-type scale (see
Appendix). A score was calculated for each team by averaging across individual
 CEO LEADERSHIP STYLE AND TEAM EFFECTIVENESS 409
team members’ scores, where higher scores indicate greater consensus. This
construct measured the amount of effort that members of the TMT invested in
trying to reach an agreement. Cronbach’s alpha was 0.77. Again, a one-way
ANOVA was performed on the consensus decision-making index to determine if
there was greater variability in the ratings between organizations than within
organizations (Winer, 1971). The F-ratio was significant, F = 2.726, p < .001 and
the rwg(j) for consensus decision making was 0.8.

Team effectiveness. Team effectiveness was measured by seven Likert-type

questionnaire items on a 5-point scale, completed by each team member (see
Appendix). These seven items were averaged to form a composite team effective-
ness index. Cronbach’s alpha for this scale was 0.92. Again, a one-way ANOVA
was performed on this index to determine if there was greater variability in the
ratings between organizations than within organizations (Winer, 1971). The
F-ratio was significant, F = 3.196, p < .001, and the rwg(j) value was 0.84.
The average inter-rater agreement across the independent and dependent
variables is 0.76, i.e., all above 0.7, which is generally accepted as a satisfactory
level of agreement. Furthermore, 45 of the 83 groups have at least this level of
agreement level on all scales and a further 16 reach this level of agreement on all
but one scale.

Control variables. We introduced a number of variables into the multi-

variate analysis in order to ensure that the effects of exogenous variables were
minimized. Three variables identified by Smith et al. (1994) were utilized in each
of the hierarchical regressions as controls. Firm size was included because of its
relationship to team size, which previous studies have shown to have an
important impact on team functioning. Past performance (ROIt-1) was included
to control for the possible effects of prior firm performance that might lead to
changes in perceptions of consensus decision making and in perceptions of team
effectiveness. The industry-level controls are included to remove potential
industry effects on firm performance. Also included was industry growth rate to
account for the impact of general product demand on perceptions of team
effectiveness. A major problem in a study that relies entirely on self-report data is
that results sharing significant associations could be explained as a result of
common methods or “feel good” or “halo” effects. Accordingly we selected a
variable with high affective content and that was highly correlated with the other
variables as a control variable—perceptions of team member social integration.
This measure was chosen on both theoretical grounds and empirical grounds. It is
likely to reflect members’ generally positive or negative feelings about their
team. It also correlated highly with the measure of consensus decision making.
By controlling for social integration we were likely to assess the relationship of
such decision making to other variables such as perceptions of leadership and
team effectiveness rather than an underlying affective reaction to the team as a
410 FLOOD ET AL.

whole. By incorporating this as a control variable we were able to considerably

reduce, although probably not eliminate, likely effects due to common methods
or halo effects. This is similar to the approach recommended by De Vries, Roe,
and Taillieu (1998). The measure of social integration was originally developed
by Smith et al. (1994) and has a Cronbach’s alpha coefficient in this study of
0.85. The items used in this scale are listed in the Appendix.
Before combining the Irish and US team data we carried out a series of t-tests
to identify any significant differences between the samples on the leadership
style, consensus decision making, or team effectiveness variable. No significant
differences emerged and the data set was accordingly pooled for the purpose of
our analyses.

Results
This study was concerned with investigating the effect of CEO leadership style
on group processes and team effectiveness. CEO leadership style was hypoth-
esized to both directly and indirectly (via consensus decision making) influence
the reported level of overall team effectiveness. Authoritarian, laissez faire, and
transactional leadership are hypothesized to have a negative effect on consensus
decision making and on reported team effectiveness. Transformational leader-
ship is proposed to have a positive relationship with consensus decision making
and on reported team effectiveness. Consensus decision making is hypothesized
to have a positive relationship with perceived effectiveness of the team.
Table 1 contains means, standard deviations, and the inter-correlation matrix
of the study variables. Most of the correlations were in the moderate range as
would be expected among related behavioural dimensions.
To test our model outlined above a series of regression analyses were
performed. These were used to assess: (a) the direct effect of leadership style on
team effectiveness, (b) the effect of consensus decision making on team
effectiveness, (c) the effect of leadership style on consensus decision making,
and (d) the effect of leadership style on team effectiveness after the effects of
consensus decision making have been controlled for. Regression (a) represents
the direct model; regressions (b) and (c) represent the process model, and
regression (d), together with the results from (a) and (c), tests for mediation. The
results of these regressions are shown in Table 2.
The first question is whether measures of leadership style are significantly
related to perceptions of team effectiveness. It can be seen from regression (a) in
Table 2 that there is a significant amount of variance (26.0%) in effectiveness
explained by leadership style, supporting this hypothesis. In particular, the
coefficients of laissez faire and transformational leadership are significant,
suggesting that these types of leadership in particular are related (laissez faire
leadership negatively; transformational leadership positively) with perceptions
of team effectiveness.
 TABLE 1
Means, standard deviations, and correlations of study variables

M SD 1 2 3 4 5 6 7 8 9

1. Team effectiveness 3.58 0.55

2. Return on investment (1990) 19.03 79.92 0.05
3. No. of employees 276.46 346.33 –0.16 0.02
4. Growth rate 10.71 13.42 –0.12 –0.15 0.02
5. Authoritarian leadership 2.25 0.56 –0.35** –0.03 0.01 0.02
6. Laissez faire leadership 1.45 0.38 –0.51*** –0.13 –0.04 –0.02 0.37***
7. Transactional leadership 3.41 0.37 0.32** 0.02 0.02 –0.14 –0.02 –0.44***
8. Transformational leadership 3.37 0.60 0.54*** 0.03 –0.02 –0.13 –0.27* –0.55*** 0.58***
9. Consensus decision making 3.38 0.52 0.67*** –0.08 –0.12 –0.08 –0.44*** –0.31** –0.09 0.23
10. Social integration 3.57 0.48 0.46*** –0.06 –0.15 0.09 –0.29** –0.23* –0.04 0.19 0.44***

* p < .05; ** p < .01; *** p < .001.

CEO LEADERSHIP STYLE AND TEAM EFFECTIVENESS
411

411
412
412

TABLE 2
The determinants of team effectiveness

Regression a b c d

Dependent variable Team Team Consensus Team

FLOOD ET AL.

effectiveness effectiveness decision-making effectiveness

Step l—control variables

Return on investment (1990) 0.05 0.09 –0.06 0.08
No. of employees –0.12 –0.06 –0.07 –0.08
Growth rate –0.10 –0.08 –0.14 –0.02
Social integration 0.30** 0.21 0.28* 0.16*
R2 (adjusted R2) 0.247 (0.206)*** 0.247 (0.208)*** 0.194 (0.150)** 0.247 (0.206)***
Step 2—process variables
Consensus decision making 0.57*** 0.53***
Change in R 2 due to step (change in adjusted R2) 0.261 (0.268)*** 0.262 (0.268)***
Step 3—leadership variables
Authoritarian leadership –0.12 –0.25* 0.02
Laissez faire leadership –0.22* –0.22 –0.12
Transactional leadership 0.01 –0.29* 0.16
Transformational leadership 0.32** 0.14 0.24*
Change in R 2 due to step 3 (change in adjusted R2) 0.260 (0.244)*** 0.158 (0.128)** 0.182 (0.175)***
Final R 2 (adjusted R 2) 0.506 (0.450)*** 0.508 (0.474)*** 0.352 (0.278)*** 0.690 (0.649)***

* p < .05; ** p < .01; *** p < .001. n = 79 in all regressions.

 CEO LEADERSHIP STYLE AND TEAM EFFECTIVENESS 413
The second question is whether there is a direct relationship between con-
sensus decision making and team effectiveness. Regression (b) clearly supports
the hypothesis that there is, with 26.1% of the variance in effectiveness explained
by consensus decision making. The relationship, as expected, is in the positive
direction.
The third question is whether leadership style is related to consensus decision
making. Regression (c) shows that 15.8% of the variance in consensus decision
making is accounted for by leadership style—this, too, represents a significant
amount. In particular, authoritarian and transactional leadership styles both have
significant coefficients, with both styles being negatively related to consensus
decision making.
The fourth, and final, question is whether the relationship between leadership
style and team effectiveness is mediated by consensus decision making. It is
necessary to compare the significance of a direct regression of team effectiveness
on leadership style with the same regression controlling for consensus decision
making (regression d). Table 2 shows that the latter explains only 18.2% of the
variance, compared with 26.0% in the former, and the significance of the
individual coefficients is greatly reduced (laissez faire leadership is no longer
significant, and transformational leadership now has p > .01). These are the
requirements given by Baron and Kenny (1986) for partial mediation. Since the
final step still explains 18.2% of the variance in team effectiveness, it is some
way off complete mediation, but there is certainly part of the relationship
between leadership style and team effectiveness that is due to consensus decision
making.
In summary, the results support all three hypothesized relationships models
discussed earlier: there is a direct relationship between consensus decision
making and team effectiveness; a direct relationship between leadership style and
team effectiveness; and this relationship is partially mediated by the group
process of consensus decision making.

Discussion
Leadership was shown in our study to have had a significant influence on
consensus decision making within the top management groups. 1 Although these
findings do not establish causality due to the cross-sectional nature of the study,

1A criticism of this point is that social integration has an apparently stronger influence on

consensus decision making than the leadership variables. However, it should be pointed out that
leadership style only has a smaller effect on consensus decision making when social integration has
been entered first. If leadership style was entered first it would have a much greater effect. Social
integration is expected to be very similar to consensus decision making, and since the data comes
from the same source, is likely to share common method variance. This is why it is used as a control
variable. The fact that leadership style still has a significant effect after this suggests that there
really is a relationship between leadership and consensus decision making, and the result is not due
to common method variance.
414 FLOOD ET AL.

they do shed light on important interaction patterns between CEOs leadership

styles and their relationship to the perceptions of members of the TMG.
Authoritarian leadership was found to be negatively and significantly related
to consensus decision making. This confirms previous theory and research
suggesting that CEO dominance may reduce the degree of consensus achieved in
reaching strategic decisions (Finkelstein & Hambrick, 1996). Eisenhardt and
Bourgeois (1988) found that where CEOs were less dominant, the team
maintained a collaborative viewpoint, where co-operative behaviour focused on
group goals and the decision process was described as “consensus style”. They
also found that the presence of a powerful CEO could influence conflict levels by
forcing team members to resort to covert coalition building to accomplish their
purposes.
Transactional leadership was also negatively and significantly related to
consensus decision making as hypothesized. Transactional leadership has been
described as an exchange process. People jockey for positions in a transactional
group (Bass, 1997), which may create competition between team members,
reducing their willingness to engage in co-operative behaviour, where each may
be more focused on their own individual goals rather than the group’s goals.
Among the individual leadership styles, transformational leadership is the
only leadership style that is significant and positively related to reported team
effectiveness. A number of studies have suggested that transformational
leadership has a positive, significant relationship with work group performance
(Bass, 1997; Bass, Waldman, Avolio, & Bebb, 1987). Kahai, Sosik, and Avolio
(1997) evaluated the effects of high and low levels of transformational leadership
style on student work groups and found that groups working under high
transformational leadership reported higher levels of perceived performance,
extra effort, and satisfaction with the leader. As Bass (1997) reported,
transformational leaders move followers to transcend their own self-interests for
the good of the group as they motivate followers to work for goals that go beyond
immediate self-interests.
The results of this study demonstrate that CEO leadership styles have a
moderately strong relationship with reported top management group effective-
ness and illustrate the importance of paying attention to the role of the CEO. Our
results demonstrate that the leadership style of CEOs, in particular transform-
ational leadership, does have a substantial influence on both the consensus
decision-making process and upon reported team effectiveness in fast-paced high
technology firms.
The study design does not allow us to assume causality because it is cross
sectional. The study also suffers from the weakness of being based entirely on
self-report data, so that associations could be due to shared variance based on
common methods. However by controlling for both prior company performance
and team members’ perceptions of social integration we have reduced the blanket
 CEO LEADERSHIP STYLE AND TEAM EFFECTIVENESS 415
effects of a “feel good” factor associated with company performance and with the
general social climate in the team. The results suggest that that leadership style,
specifically transformational leadership, is associated with members’ per-
ceptions of team effectiveness, partly but not entirely mediated by group
processes—specifically consensus decision making. CEO leadership style, we
suppose, influences consensus decision making where the leader inspires and
motivates team members to rise above their individual interests to embrace a
shared vision of their work. In such a situation, members are more likely to
practise consensus decision making. This in turn may lead team members to
perceive team effectiveness in positive ways, which is likely to increase their
commitment to the team and the organization.
Future research should seek to more precisely measure the variables we have
examined here, such as leadership style. In addition to measuring leadership style
via questionnaire survey, researchers might also observe and rate CEO style in
team meetings to provide independent validation of team member reports.
Consensus decision-making could also be rated in team meetings perhaps by
using video and audio tapes of meetings. Finally team effectiveness is best
measured by third-party reports or independent outcome data. Company per-
formance data, stakeholder ratings, and employee ratings of TMG effectiveness
are some of the ways in which team effectiveness might be measured. Future
research might also adopt a longitudinal perspective, ideally studying newly
created teams or the effect of new CEOs’ leadership styles on TMG decision
making and performance.
The practical implications of our research are important for CEOs operating in
highly volatile environments (which probably means most CEOs, given the
increasingly competitive environment and global marketplace in which firms
operate). A transformational leadership style that involves attracting TMG
members to embrace the CEO’s appealing vision, rather than transactional,
authoritarian, and laissez faire leadership styles, appears most effective. This
implies companies should seek and appoint leaders with these styles and develop
existing leaders so that they learn to adopt these styles. The data also imply that
facilitating the involvement of the TMG in decision making rather that directing
their decision making bolsters their confidence in the TMG’s effectiveness. Such
approaches should also therefore be encouraged in the TMG’s decision making.
In the 21st century there is increasing evidence that those companies that can
ride the waves of change will have at their helms leaders that inspire others with
their sense of direction, their values, motives, and beliefs. It is such leaders that
engage their fellow executives within the company and who draw in an open and
constructive way on their knowledge, skills, and abilities to promote both team
and organizational effectiveness. This research adds to the evidence for this trend
and suggests the strategic importance for work and organizational psychology of
a continued focus on leadership in the top management team.
416 FLOOD ET AL.

REFERENCES
Aldrich, H.E. (1979). Organizations and environment . Englewood Cliffs, NJ: Prentice-Hall.
Amason, A.C. (1996). Distinguishing the effects of functional and dysfunctional conflict on
strategic decision making: Resolving a paradox for top management teams. Academy of
Management Journal , 39, 123–148.
Argenti, J. (1976). Corporate collapses: The cause and symptoms. Maidenhead, UK:
McGraw-Hill.
Ashley, W.G., & Van de Ven, A.H. (1983). Central perspectives and debates in organization
theory. Administrative Science Quarterly, 28, 245–273.
Baron, R., & Kenny, D.A. (1986). The moderator–mediator variable distinction in social
psychological research: Conceptual, strategic and statistical considerations. Journal of
Personality and Social Psychology, 51, 1173–1182.
Bass, B. (1990). Bass & Stogdill’s handbook of leadership: Theory, research and managerial
applications (3rd ed.). New York: Free Press.
Bass, B. (1997). Does the transactional–transformational leadership paradigm transcend
organisational and national boundaries? American Psychologist, 52, 130–139.
Bass, B.M., Waldman, D.A., Avolio, B.J., & Bebb, M. (1987). Transformational leadership and the
falling domino’s effect. Group and Organizational Studies, 12, 73–78.
Bourgeois, L. (1980). Performance and consensus. Strategic Management Journal, 1, 227–248.
Burns, J.M. (1978). Leadership. New York: Harper & Row.
Conger, J., & Kanungo, R. (1987). Toward a behavioral theory of charismatic leadership in
organisational settings. Academy of Management Review, 12, 637–647.
Cyert, R.M., & March, J.G. (1963). A behavioural theory of the firm. Englewood Cliffs, NJ:
Prentice-Hall.
Day, D.V., & Lord, R.G. (1988). Executive leadership and organizational performance suggestions
for a new theory and methodology. Journal of Management , 14, 453–464.
Den Hartog, D., Van Muijen, J., & Koopman, P. (1997). Transactional versus transformational
leadership: An analysis of the MLQ. Journal of Occupational and Organizational Psychology,
70, 19–34.
Dess, D. (1987). Consensus on strategy formulation and organizational performance. Strategic
Management Journal , 8, 259–277.
Dess G., & Origer, N. (1987). Environment, structure and consensus in strategy formulation—a
conceptual integration. Academy of Management Review, 12, 313–330.
De Vries, R.E., Roe, R.A., & Taillieu, T.C.B. (1998). Need for supervision: Its impact on
leadership effectiveness. Journal of Applied Behavioural Science, 34, 446–501.
Eisenhardt, K., & Bourgeois, L.J. (1988). Politics of strategic decision making in high velocity
environments: Toward a midrange theory. Academy of Management Journal, 31, 737–770.
Finkelstein, S. (1992). Power in top management teams: Dimensions, measurement, and
validation. Academy of Management Journal, 35, 505–538.
Finkelstein, S., & Hambrick, D.C. (1990). Top-management team tenure and organisational
outcomes: The moderating role of managerial discretion. Administrative Science Quarterly, 35,
484–503.
Finkelstein, S., & Hambrick, D.C. (1996). Strategic leadership: Top executives and their effects on
organizations . St. Paul, MN: West.
Flood, P., Fong, C.M., Smith, K.G., O’Regan, P., Moore, M., & Morley, M. (1997). Pioneering
and the top management team. International Journal for Human Resource Management , 8,
291–306.
Flood, P., MacCurtain, S., & West, M. (2000). Effective top management teams. Dublin: Blackhall
Publishing.
French, J., Morrison, W., & Leoinger, G. (1960). Coercive power and forces affecting conformity.
Journal of Abnormal and Social Psychology, 61, 93–101.
 CEO LEADERSHIP STYLE AND TEAM EFFECTIVENESS 417
Gioia, D.A., & Sims, H.P. (1985). On avoiding the influence of implicit leadership theories in
leader behavior descriptions. Journal of Education and Psychological Measurement, 45,
217–237.
Gist, M.E., Locke, E.A., & Taylor, S.A. (1987). Organisational behavior: Group structure, process
and effectiveness. Journal of Management, 13, 237–257.
Guth, W.D., & MacMillan, I.C. (1986). Strategy implementation versus middle management
self-interest. Strategic Management Journal, 7, 313–327.
Guzzo, R., & Shea, G. (1992). Group performance and intergroup relations in organizations. In
L. Hough & M.D. Dunnette (Eds.), Handbook of industrial and organisational psychology .
Palo Alto, CA: Consulting Psychologist Publishers.
Hambrick, D. (1994). Top management groups: A conceptual integration and reconsideration of
the “team” label. In B.M. Staw & L.L. Cummings (Eds.), Research in organizational behavior,
Vol. 16 (pp. 171–214). Greenwich, CT: JAI Press.
Hambrick, D., & D’Aveni, R. (1992). Top team deterioration as part of the downward spiral of
large corporate bankruptcies. Management Science, 38, 1445–1466.
Hambrick, D., & Mason, P. (1984). Upper echelons: The organization as a reflection of its top
managers. Academy of Management Review, 9, 193–206.
House, R.J., Spangler, W.D., & Woycke, J. (1991). Personality and charisma in the US presidency:
A psychological theory of leader effectiveness. Administrative Science Quarterly, 36,
119–131.
Howell, J., & Avolio, B. (1993). Transformational leadership, transactional leadership, locus of
control and support for innovation: Key predictors of consolidated business unit performance.
Journal of Applied Psychology , 78, 891–902.
Jackson, S. (1992). Consequences of group composition for the interpersonal dynamics of strategic
issue processing. Advances in Strategic Management, 12, 327–351.
James, L.R., Demaree, R.G., & Wolfe, G. (1984). Estimating within group inter-rater reliability
with and without response bias. Journal of Applied Psychology , 69, 85–98.
Kahai, S., Sosik, J., & Avolio, B. (1997). Effects of leadership style and structure on work group
process and outcomes in an electronic meeting system environment. Personnel Psychology, 50,
121–146.
Kirmeyer, D.L., & Lin, T. (1987). Social support: Its relationship to observed communication with
peers and supervisors. Academy of Management Journal, 30, 138–151.
Knight, D., Pearce, C.L., Smith, K.G., Olian, J.D., Sims, H.P., Smith, K.A., & Flood, P. (1999).
Top management team diversity, group processes and strategic consensus. Strategic
Management Journal , 20, 445–465.
Lieberson, S., & O’Connor, J.F. (1972). Leadership and organizational performance: A study of
large corporations. American Sociological Review, 37, 117–130.
Manz, C.C., & Sims, H.P. (1991). Superleadership: Beyond the myth of heroic leadership.
Organizational Dynamics, 19, 18–35.
Miller, D., & Friesen, P.H. (1977). Strategy-making in context: Ten empirical archetypes. Journal
of Management Studies, 14, 253–280.
Mintzberg, H. (1979). The structuring of organizations . Englewood Cliffs, NJ: Prentice-Hall.
Pfeffer, J. (1992). Managing with power. Boston, MA: Harvard Business School Press.
Romanelli, E.J., & Tushman, M. (1986). Inertia, environments and strategic choice: A
quasi-experimental design for comparative-longitudinal research. Management Science, 32,
608–621.
Ross, J.E., & Kami, M.J. (1973). Corporate management in crisis. Englewood Cliffs, NJ:
Prentice-Hall.
Roth, K. (1995). Managing international interdependence: CEO characteristics in a resource based
framework. Academy of Management Journal, 38, 200–231.
Scully, J.A., Sims Jr., H.P., Olian, J.D., Schnell, E.R., & Smith, K.A. (1994). Tough times make
tough bosses: A meso analysis of CEO leader behaviour. Leadership Quarterly, 5, 59–83.
418 FLOOD ET AL.

Shaw, M. (1981). Group dynamics: The psychology of small group behavior . New York: McGraw-
Hill.
Smith, K.G., Smith. K.A., Bannon, D.P., Olian, J.D., Sims, H.P., & Scully, J. (1994). Top
management team demography and process: The role of social integration and communication.
Administrative Science Quarterly, 39, 412–438.
Stogdill, R.M. (1959). Individual behavior and group achievement. New York: Oxford University
Press.
Vance, S.C. (1983). Corporate leadership. New York: McGraw-Hill.
Waldman, D.A., Bass, B.M., & Yammarino, F.J. (1990). Operationalizing charismatic leadership
using a levels-of-analysis framework. Leadership Quarterly, 1, 193–208.
West, M., Borrill, C., & Unsworth, K. (1998). Team effectiveness in organisations. In C. Cooper &
I. Robertson (Eds.), International review of industrial and organisational psychology , Vol. 13.
London: Wiley & Sons.
Winer, B.J. (1971). Statistical principles in experimental design (2nd ed.). New York:
McGraw-Hill.

Manuscript received February 2000

Revised manuscript received April 2000

APPENDIX

I. Authoritarian leadership
Q1 The CEO gives me instructions about how to do my job.
Q10 The CEO gives me orders about my work.
Q18 The CEO is often displeased with my work for no apparent reason.
Q22 The CEO is often critical of my work, even when I perform well.
Q28 The CEO provides commands in regard to my job.
Q37 The CEO gives me instructions about how to do my job.
Q45 The CEO tells me how to do my job.
Q55 When it comes to my work, the CEO gives me instructions on how to carry it out.
Q62 I am frequently reprimanded without knowing why.
Cronbach’s alpha coefficient: 0.90

II. Laissez faire leadership

Q77 No-one, including myself, is solving the problems of my job.
Q81 No-one, including myself, expects much of me in terms of performance.
Q85 No-one, including myself, is providing any vision for our organization.
Cronbach’s alpha coefficient: 0.82

III. Transactional leadership

Q9 The CEO establishes my performance goals.
Q16 The CEO will make sure I’m compensated more if I perform well.
Q27 The CEO sets goals for my performance.
Q41 The CEO makes my compensation contingent upon my performance.
Q49 The CEO makes decisions about my compensation mainly on performance.
 CEO LEADERSHIP STYLE AND TEAM EFFECTIVENESS 419
Q54 The CEO establishes the goals for my work.
Q56 The CEO determines my compensation based on my performance.
Q66 The CEO establishes my goals for me.
Cronbach’s alpha coefficient: 0.84
IV. Transformational leadership
Q6 The CEO encourages me to think I can do very well in my work.
Q12 The CEO increases my optimism for the future.
Q13 The CEO provides me with reasons to change the way I think about problems.
Q15 The CEO inspires me to get a lot more done than I could have if the CEO was not around.
Q17 The CEO provides a vision to our organization.
Q20 The CEO arouses in me the effort to work harder and better.
Q21 The CEO provides me with new ways of looking at things which used to be a puzzle.
Q23 I am ready to trust the CEO to overcome any obstacle.
Q24 The CEO motivates me to do more than I originally expected I would do.
Q25 The CEO provides a clear vision of who and what we are.
Q35 The CEO encourages me to expect high performance from myself.
Q39 The CEO makes me enthusiastic about assignments.
Q40 The CEO provides a clear vision of where we are going.
Q42 Because of the CEO, I do more than expected I could do.
Q44 The CEO enables me to think about old problems in new ways.
Q50 There is no doubt that the CEO is very visionary.
Q51 The CEO’s ideas have forced me to rethink some of my own ideas which I had never
questioned before.
Q60 The CEO makes me feel good to be around him/her.
Q61 The CEO stimulates my efforts to excel.
Q65 The CEO heightens my motivation to succeed.
Q82 The CEO provides his/her vision of our organization to me.
Cronbach’s alpha coefficient: 0.96

Consensus decision making

Q25 TMG decisions are not final until all the members agree that the decision is acceptable to
them.
Q30 Everyone’ s input is incorporated into most important company decisions.
Q32 The TMG believes that taking more time to reach consensus on a strategic decision is
generally worth it.
Q45 When making decisions, the TMG works hard to reach an agreement.
Cronbach’s alpha coefficient: 0.77

Team effectiveness
Q21 The members of the TMG share a common vision of what this company is and what it
should become.
Q26 Our company goals are clear in the minds of every member of the TMG.
Q29 Our TMG is very successful in its efforts.
Q36 The TMG is very effective at getting things done.
Q38 All members of the TMG are committed to achieving the company’s goals.
Q41 The TMG does not perform well as a group (reverse scoring).
Q46 Our TMG is very good at achieving its goals.
Cronbach’ s alpha coefficient: 0.91
420 FLOOD ET AL.

Social Integration

Q23 The members of the TMG are quick to defend each other from criticism by outsiders.
Q24 The successes of other members of the TMG help me achieve my own objectives.
Q30 Everyone’ s input is incorporated into most important company decisions.
Q31 The members of the TMG get along very well.
Q33 Relationships between members of the TMG are best described as “win–lose”; if he/she
wins, I lose (reverse coded).
Q35 The members of the TMG are always ready to co-operate and help each other .
Q37 When final decisions are reached it is common for at least one member of the TMG to be
unhappy with the decision (reverse coded).
Q40 There is a great deal of competition between members of the TMG (reverse coded).
Q42 The members of the TMG really stick together.
Cronbach’s alpha coefficient: 0.85
View publication stats