Upper Echelons Theory

Upper Echelons Theory is the idea that top executives view their situations through their own highly personalized lenses. These individualized construals of strategic situations arise because of differences among executives in their experiences, values, personalities and other human factors. Using the upper echelons perspective, researchers have examined the effects of top management team (TMT) composition and processes on organizational outcomes, as well as the influences of chief executive officer (CEO) characteristics on company strategy and performance. Studies have confirmed the basic logic of upper echelons theory (comprehensively reviewed in Finkelstein et al. Strategic leadership: theory and research on executives, top management teams, and boards. Oxford University Press, New York, 2009), pointing to the conclusion that if we want to understand strategy we must understand strategists.