Not-for-profit top management team dynamics: Understanding the top management team potency-performance relationship

This field study examines the relationship of top management team (TMT) potency, the collective belief in the group's own effectiveness (Shea & Guzzo, 1987), to several measures of organizational performance in not-for-profit organizations in the legal service and water service industries. The impact of two potential moderating constructs is also assessed: TMT cohesion, the attraction and feeling of commonality group members have for each other (Bollen & Hoyle, 1990), and TMT cognitive conflict, the vigorous and competitive exchange of ideas (Ensley & Pearce, 2001). These are posited to have a positive effect on the potency-performance relationship.; The literature of upper echelon team dynamics, of potency in small groups and teams, of cohesion and of cognitive conflict are explored for theory or evidence suggesting impacts of the independent and moderating variables on performance. The review reveals little examination of the effects of potency, cohesion and cognitive conflict in not-for-profit organizations. This study examines the impact of TMT potency on performance, and the moderating variable impacts, in the not-for-profit environment. The sampling plan utilizes random selection of organizations in the legal services and water service industries from public lists of California organizations. Survey instruments were received from TMT members of organizations responding to letters to their chief executive officers. The constructs of potency, cohesion, and cognitive conflict in the top management teams are measured by scales derived from the literature. Performance is assessed utilizing measures of productivity, quality and financial strength.; Descriptive statistics of the firms and responding individuals found TMT members in the legal service industry older (p < .05), more balanced in sex distribution (p < .01), and with longer service at the firm (p < .01) than in the water service industry.; Regression analysis and other techniques examine the relationships between the independent and dependent variables. A positive relationship (p < .05) was found between potency and a measure of financial strength (equity to debt ratio) utilizing Pearson correlation (one-tailed), and linear regression analysis (two-tailed) analyses. Further analysis of the proposed moderating variables on the potency-performance relationship reveals a positive moderation of cognitive conflict on the potency to financial strength relationship (p < .05).