Abstract: This paper is a theoretical review of the concept of TMT diversity effect on organizational performance. There have been several policies that have been instituted to ensure that TMTs are heterogeneous. A good example is the rule that requires board of governors to have a third representation of women. Extant studies on TMT diversity and organizational performance have shown inconclusive results. The existing SHRM models on managing of diversity are still weak. From the empirical literature review, it is evident that there exists a black box between TMT diversity and organizational performance. These studies recommend the exploration of the black box in order to demystify the relationship. The study focuses on inclusion as a moderating variable of the relationship. In the theoretical review section, upper echelon theory, resource based view theory; social identity theory and optimal distinctive theory are critically reviewed. The upper echelon theory organizational outcomes are determined by the characteristics of TMT. The more diverse the team, the wider the perspective of the team on issues at hand which makes decision making better. This theory does not however explain how conflicts which are common with diverse teams can be overcome. The RBV explains TMT diversity which is seen as a strategic resource which is rare, heterogeneous, and valuable and takes time to create hence is non-imitable. The social identity theory explains people socialization processes. People identify themselves with other individuals of the same social group. The theory supports inclusion by stating that it is important to for the diverse team to be socially integrated to overcome conflict. This theory explains the theoretical gap identified in the upper echelon theory. The Optimal distinctive theory states that an individual has two opposing needs; need for belongingness and need for uniqueness. It shows that the benefits of diversity can only experienced when the unique individuals feel accepted into the group (inclusion). Nevertheless, this theory does not clearly outline how this inclusion can be achieved which is a theoretical gap. This review recommends the exploration of the black box in order to demystify the relationship. It further recommends the TMT diversity in terms of age, tenure, functional diversity and gender. Organizational performance should be measured using the balanced scorecard that gives a comprehensive measure compared to other performance indicators.
Keywords: Diversity of top Management team, Inclusion, Performance.
Title: Critical Review of Literature on Diversity in Top Management Team and Organizational Performance: A Research Agenda
Author: Jane Muthoni Kinuthia, Stephen Muathe
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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