Source: World Business
Date: June 2007
Author: Upper echelons theory: an update, Donald C Hambrick, Academy of Management Review, Vol 32 No 2, April 2007

This author's 1984 'upper echelons' theory asserted that executives act on the basis of their personalised interpretation of strategic situations, which stems from their experiences, values and personalities.

To understand why companies act in the ways they do, it is better to examine the top team as a collective as they usually make decisions together, except in those cases where executives act as individual 'barons'.

Then you would have to examine the personalities and attitudes of the barons with the most influence. Whether a particular CEO has more influence than another will depend on a number of factors, such as the extent to which their company is at the mercy of the external environment.

Executives filter and distort information in a three-step process: the field of vision (where they look); selective perception (what they see and hear); and interpretation (the meaning they attach to the information). Future research should examine whether this is true and why executives experience certain changes at particular times.