Who Lives in the C-Suite? Organizational Structure and the Division of Labor in Top Management
This paper shows that top management structures in large US firms radically changed since the mid-1980s. While the number of managers reporting directly to the CEO doubled, the growth was driven primarily by functional managers rather than general managers. Using panel data on senior management positions, we explore the relationship between changes in executive team composition, firm diversification, and IT investments--which arguably alter returns to exploiting synergies through corporate-wide coordination by functional managers in headquarters. We find that the number of functional managers closer to the product ("product" functions i.e., marketing, R&D) increase as firms focus their businesses, while the number of functional managers farther from the product ("administrative" functions i.e., finance, law, HR) increase with IT investments. Finally, we show that general manager pay decreases as functional managers join the executive team suggesting a shift in activities from general to functional managers--a phenomenon we term "functional centralization."
We would like to thank Erik Brynjolfsson, David Collis, Wouter Dessein, Bob Gibbons, Shane Greenstein, Don Hambrick, Connie Helfat, Bruce Harreld, Anne Marie Knott, Kristina McElheran, Paul Oyer, Heikki Rantakari, Jim Rebitzer, Julio Rotemberg, Raffaella Sadun, Tano Santos, John Van Reenen, David Yoffie, Tim Van Zandt, and especially Jim Dana for very helpful discussions. Thanks also to seminar participants at IESE, LBS, the NBER Organizational Economics meeting, UCLA, Washington University, HBS strategy conference, HBS brown bag and to Erik Brynjolfsson and Lorin Hitt, for the Harte Hanks data. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Maria Guadalupe & Hongyi Li & Julie Wulf, 2014. "Who Lives in the C-Suite? Organizational Structure and the Division of Labor in Top Management," Management Science, vol 60(4), pages 824-844. citation courtesy of