Who Lives in the C-Suite? Organizational Structure and the Division of Labor in Top Management

35 Pages Posted: 23 Nov 2012  

Maria Guadalupe

INSEAD - Economics and Political Sciences; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Hongyi Li

UNSW Australia Business School, School of Economics

Julie Wulf

Harvard Business School

Multiple version iconThere are 4 versions of this paper

Date Written: November 22, 2012

Abstract

This paper shows that top management structures in large US firms have changed significantly since the mid-1980s. While the size of the executive team – the group of managers reporting directly to the CEO – doubled during this period, this growth was driven primarily by an increase in functional managers rather than general managers. Using panel data on senior management positions, we explore the relationship between changes in the structure of the executive team, 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 and D) increases as firms become less diversified, while the number of functional managers farther from the product ("administrative" functions i.e., finance, law, HR) increases 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".

Keywords: Communication, Organizational Design, Functions, Centralization, M-form, Hierarchy, Top Management Team, Information Technology, Activities, Diversification

Suggested Citation

Guadalupe, Maria and Li, Hongyi and Wulf, Julie, Who Lives in the C-Suite? Organizational Structure and the Division of Labor in Top Management (November 22, 2012). INSEAD Working Paper No. 2012/118/EPS. Available at SSRN: https://ssrn.com/abstract=2179524 or http://dx.doi.org/10.2139/ssrn.2179524

Maria Guadalupe (Contact Author)

INSEAD - Economics and Political Sciences ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

Hongyi Li

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

Julie M. Wulf

Harvard Business School ( email )

Harvard Business School
Boston, MA
United States

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