Journal et

ARTICLE
10.1177/0149206305279054
Arendt
ofal.
Management
/ CEO-Adviser
/ October
Model2005

A CEO-Adviser Model
of Strategic Decision Making
Lucy A. Arendt*

Professional Programs in Business, University of WisconsinGreen Bay,

2420 Nicolet Drive, WH 460, Green Bay, WI 54311

Richard L. Priem

School of Business Administration, Management & Organizations Area,

University of WisconsinMilwaukee, P.O. Box 742, Milwaukee, WI 53201

Hermann Achidi Ndofor

Belk College of Business Administration, University of North Carolina at Charlotte,

9201 University City Blvd., Charlotte, NC 28223

Upper echelons research has emphasized decision making either by individual CEOs or by teams
of top managers. The authors introduce the CEO-Adviser model as an intermediate model of strategic decision making. The CEO-Adviser model leads to new propositions that have not been
explored through the individual CEO or top management team models concerning how context
affects the use of formal versus informal advisory systems and how advisers are selected.
Keywords:

CEO-Adviser model; CEO; top management team; strategic decision making

Two models have dominated research on top-level organizational decision making. The
first model takes as its unit of analysis the CEO, construed as the firms primary leader and
principal decision maker. This CEO model is seen in the literatures on CEO environmental
We thank Allen Amason, David Berg, Tom Dalziel, Mark Mone, Paul Nystrom, Abdul Rasheed, and participants in
the University of WisconsinMilwaukee strategy seminar for helpful comments on earlier versions of this article. An
earlier version of this work was presented at the 2003 Academy of Management meetings in Seattle, Washington.
*Corresponding author. Tel.: 920-465-2817; fax: 920-465-2660.
E-mail address: arendtl@uwgb.edu
Journal of Management, Vol. 31 No. 5, October 2005 680-699
DOI: 10.1177/0149206305279054
2005 Southern Management Association. All rights reserved.

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scanning, CEO cognition, and CEO pay, among others (e.g., Daft, Sormunen, & Parks, 1988;
Priem & Rosenstein, 2000; Westphal & Zajac, 1994). The second model takes as its unit of
analysis the firms top management team (TMT), construed as a dominant coalition that shares
responsibility for decision making (e.g., Hambrick & Mason, 1984). This TMT model is seen
in the literatures on TMT conflict, TMT consensus, strategic decision aids, and TMT demographics, among others (e.g., Dooley & Fryxell, 1999; Homburg, Krohmer, & Workman,
1999; Schweiger, Sandberg, & Ragan, 1986). Each model has expanded our knowledge of
strategic decision making.
Serious questions abound, however, about the representativeness of these two models,
especially when they are construed as anchor points on a strategic decision-making continuum. To the extent that the CEO model focuses on CEOs as lone decision makers, perhaps by
examining the actions of the CEO alone when considering a strategic decision, the CEO model
is an atomized, undersocialized conception of human action (Granovetter, 1985: 483) that
neglects the CEOs social context. Such lone ranger CEOs would wield their power and
make unilateral decisions, despite being boundedly rational and despite needing to address
multiple, conflicting goals and evaluate myriad options (Cyert & March, 1963). These qualities, along with the ambiguous nature of strategic decisions, likely limit the extent to which
many CEOs will choose to be lone rangers and make strategic decisions single-handedly
(Garten, 2001).
Similarly, to the extent that it implies collective decision making, the TMT model likely
applies to a relatively small percentage of firms. As described, the model is an oversocialized
conception (Granovetter, 1985: 485) that does not recognize that TMTs tend to be hierarchical decision-making bodies (Hollenbeck et al., 1995) in which involvement is not equal but,
rather, is driven by the influence of advisory systems within and outside the firm. The distributed expertise of TMT members (Hollenbeck et al., 1995), control of resources (Finkelstein,
1992), intrafirm coalitions (Eisenhardt & Bourgeois, 1988), and information asymmetries
(Edmondson, Roberto, & Watkins, 2003), for example, may hinder equal decision participation by a firms top managers or may presage adverse decisions when a firms top managers do
participate equally.
These factors have raised questions about whether many TMTs should be studied as
teams at all (see, e.g., Hambrick, 1994, 1995; Pettigrew, 1992) and whether strategic decisions for many firms are made following the team structures and processes implied by an
oversocialized TMT model. Many scholars (e.g., Carpenter, Geletkanycz, & Sanders, 2004;
Hambrick, 1994, 1998; Roberto, 2003) have questioned the notion of a stable TMT that collectively makes a range of strategic decisions and have proposed alternatives to the collective
TMT model. Hambrick (1994, 1998), for example, suggested that TMTs may be characterized
by their behavioral integration, defined as the degree to which the senior management group
engages in mutual and collective interaction (Hambrick, 1998: 127). Shifting away from
behavioral descriptions of a stable TMT, Roberto (2003) proposed a fluid form of TMT, one in
which different executives come together to work on different issues. In addition to suggesting
that strategic decision making tends to involve both a stable core and dynamic periphery of
top-level executives, Roberto also noted the involvement of individuals from multiple organizational levels (2003: 127). Consistent with these observations, Pettigrew (1992) recommended that the nature of the research question influences the chosen unit of analysis (e.g., all

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top-level executives vs. those involved in a given decision). Likewise, Carpenter and his colleagues have argued that while use of a team-based approach (to empirical study) is appropriate to some questions . . . , team aggregation is not universally advisable (2004: 769).
Although the strategic decision-making process for some decisions in some firms may conform to either the CEO or the TMT model, we suggest that many strategic decisions in many
firms are made neither by a unilateral CEO nor by a TMT. Research into the social networks of
TMTs (e.g., Collins & Clark, 2003) and into the varying composition of strategic decisionmaking groups (e.g., Roberto, 2003) suggests the need for a third structural model of strategic
decision making. Thus, we propose the CEO-Adviser model, which blends individual and
group decision making. The CEO-Adviser model recognizes that individuals involved in strategic decision making may come from anywhere in the firms hierarchy and may not be consulted on all decisions, in line with Robertos (2003) stable core and dynamic periphery.
Furthermore, those involved in strategic decision making may include individuals from outside the firm, such as members of the CEOs personal social network. In adding this third
model, we agree with Carpenter and his colleagues (2004: 769), who recommended more
flexible approaches to the question, Who at the apex of the firm impacts organizational outcomes? and who observed that researchers focus should not be exclusively internal to firm
management. Such an approach does not negate the value of research conducted using either
the CEO or TMT models but posits instead a third approach that might prove more authentic
for a wide range of firms. For example, whereas TMT-based research by Michel and
Hambrick (1992) demonstrates the links between TMT characteristics and firms diversification posture, the same research from a CEO-Adviser perspective might produce a more
precise model of diversification decision making.
In the next section, we briefly review some of the important contributions and limitations of
the CEO and TMT models. Then, we detail the CEO-Adviser model and compare it to the others. Next, we develop a series of propositions to illustrate broadly how theory may benefit
from explicit inclusion of the CEO-Adviser model in the list of strategic decision-making
models. Throughout, we argue that this model accurately describes decision making in many
firms. Finally, we discuss some implications for future research on strategic decision making.

Three Models of Strategic Decision Making

Strategic decisions are those highly important organizational choices that involve strategic
positioning, affect firm performance, involve multiple functions, are highly complex and
ambiguous, and represent a substantial commitment of resources (Eisenhardt, 1989). Figure 1
provides diagrams of the three strategic decision-making models discussed in this article: the
CEO model, the TMT model, and the CEO-Adviser model. We now discuss each in turn.

The CEO Model

The CEO is the strategic decision maker in this model. As depicted by the CEO model in
Figure 1, the CEO gathers and processes information, develops a strategy, and then directs
implementation throughout the firm. Taken to an extreme, the CEO model may be considered

Arendt et al. / CEO-Adviser Model

683

Figure 1
Models of Involvement in the Strategic Decision-Making Process
Panel a. CEO Model (M = Manager)
CEO

CEO

CEO

Processing & interpreting

information

Making the decision

M
M

Gathering information

Panel b. CEO-Adviser Model (A = Adviser)

CEO

CEO
A

CEO
A

A
A

Gathering information

Processing & interpreting

information

Panel c. TMT Model (T = TMT member)

CEO

CEO

Gathering information

Making the
decision

Recommending the
decision

CEO

Processing & interpreting

information

Recommending & making the decision

execucentric, in that its essence is what Swiercz and Ross labeled an orientation that seems
unaware of the presence and legitimacy of organizational perspectives other than that of the
executive (2003: 420). This model aligns with Vroom and Yettons (1973) two autocratic

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Journal of Management / October 2005

decision-making styles. Celebrity CEOs who helm familiar firms might be expected to use
this decision style. Still, visibility and celebrity are not the distinguishing facets of the CEO
model. Instead, this model is set apart by its focus on dominant individual decision makers at
the apex of firms. Thus, the individualistic style of strategic decision making (see, e.g., Hayward & Westphal, 2002) likely occurs at lesser known firms as well, especially those led by
owner-managers.
Do some CEOs really have this much influence? Probably. Power and accountability are
not equally distributed among top managers (Finkelstein, 1992); often, the CEO retains the
largest share of both (Hambrick & Mason, 1984). Power differences are manifest in several
ways. Although compensation differentials are pronounced between CEOs and their direct
reports (Finkelstein & Hambrick, 1996), many CEOs are a breed apart in other ways as well.
Norburn (1989), for example, found CEOs to be distinguished by their diverse experiences
and by their preparation to assume responsibility for complex and demanding operations. As
one might expect, research has shown that CEOs activities, such as environmental scanning
and strategic decision making, do affect firm outcomes like structure and performance (Daft
et al., 1988; Priem, 1994). Thus, there is empirical support for the descriptive accuracy of the
CEO model.
The ability of many CEOs to make effective strategic decisions single-handedly, however,
is hampered by CEOs bounded rationality (Cyert & March, 1963) and by the ambiguous
nature of strategic decisions (Hambrick & Mason, 1984). Shifting to the other end of the decision-making continuum, the next section describes the TMT model, an accepted approach for
helping boundedly rational CEOs make strategic decisions.

The TMT Model

The firms top managers are the strategic decision maker in the TMT model (Figure 1).
When viewed as a collective decision-making body, TMT members bring key information to
the group, together develop and evaluate alternatives, resolve disagreements to reach consensus,
and jointly participate in implementing strategy. This version of the TMT model aligns with
the most democratic decision-making style described by Vroom and Yetton (1973). Leaders
using the GII style share problems with their followers as a group and solicit agreement.
Much upper echelons research appears to assume, explicitly or not, that this collective
TMT model either accurately describes firms current strategic decision-making processes or
describes what such processes should be for maximum effectiveness. This assertion is based
on the many studies that rely equally on data from all members of the TMT, however defined
(e.g., Michel & Hambrick, 1992). Thus, and perhaps for reasons of empirical necessity, the
image suggested by some scholars is one of collective effort, actual or idealized. Executive
groups that do not observe team-oriented decision-making processes often are described as
fragmented (Hambrick, 1995) or as engaged in dysfunctional conflict (Eisenhardt,
Kahwajy, & Bourgeois, 1997), which may indeed be the case.
Not generally discussed is the possibility that, for some firms at least, the collective TMT
model of strategic decision making is neither descriptive nor desired. To be a team, a group is
expected to have a relatively stable composition of individuals whose skills and abilities are

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linked to the teams purposes and performance challenges. Many executive groups may not be
teams in this sense (Hambrick, 1994); they do not have a purpose distinct from the firms, and
they may not hold their members mutually accountable for group outcomes (Cohen & Bailey,
1997). Many TMTs seem to do little collective work (Katzenbach, 1998). Although a stable
subset of the top team (Roberto, 2003: 120) tends to be involved in making various strategic
decisions, additional individuals from throughout the firm also are involved, depending on the
nature of the strategic decision and its attendant information and implementation needs
(Roberto, 2003). This lack of stability in form calls into question whether most TMTsespecially those subjected to typical empirical inquirysatisfy the fundamental criteria for teams.
This view is supported by many senior executives, whose responses, when asked about the
TMTs of which they are members, are similar to that of this executive vice president of
marketing for a large firm:
When I think of a team, I think of interaction, a lot of give-and-take, and shared purpose. In our
company, were a collection of strong players, but hardly a team. We rarely meet as a team
rarely see each other, in fact. We dont particularly share the same views. I wouldnt say we actually work at cross-purposes, but a lot of self-centered behavior occurs. Wheres the team in all
this? (Hambrick, 1994: 172).

If many TMTs do not operate as unified collectives when making strategic decisions, if true
top management teams are uncommon (Katzenbach, 1998), and if boundedly rational CEOs
cannot effectively make strategic decisions alone (Garten, 2001), then how do strategic decisions get made? In the next section, we describe a third model that develops the middle
ground between the CEO and TMT strategic decisionmaking models. Like the CEO and
TMT models, the proposed CEO-Adviser model attempts to describe who is involved with
strategic decision making and how such decision making occurs.

The CEO-Adviser Model

This proposed model of strategic decision making is based on the Judge-Advisor model
developed in the organizational behavior literature (Sniezek, 1999; Sniezek & Buckley, 1995;
Sniezek & Van Swol, 2001). Represented by the CEO-Adviser model in Figure 1, the models
characteristics include the CEO as the principal decision maker, both internal and external
advisers, CEO selection of advisers, and dyadic communication between the CEO and advisers. This model is similar to the consultative decision-making styles described by Vroom
and Yetton (1973). Both the CI and CII decision-making styles involve leaders listening to followersideas and then making decisions alone. Likewise, in the CEO-Adviser model, the CEO
solicits information yet holds ultimate authority for the final decision, and is made accountable for it (Sniezek, 1999: 1). The CEO-Adviser model also involves a complex social information search to identify strategic advisers and considerable CEO-Adviser trust and collaboration. Thus, the CEO-Adviser model is an intermediate model of strategic decision making.
Foundations of the CEO-Adviser model. The Judge-Advisor model was developed to provide more ecologically valid representations of the decision process as it occurs in the natural

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environments of decision makers (Sniezek, 1999: 1). According to Sniezek and Buckley
(1995), decision making cannot be understood adequately using extant research on either individuals or groups because decision making often involves multiple people whose participation is differentiated, rather than coequal. Thus, there is a need for a model in which individual
decision makers consult with, and receive information from, others (individually or in groups)
when faced with important decisions under uncertainty (Sniezek & Van Swol, 2001).
We have changed the models name to CEO-Adviser decision making for two reasons.
First, the Judge label might cause unintended confusion with a courtlike setting. Although
CEO-Adviser decision making can involve advocacy and interadviser conflict, neither is
essential to the model. Second, the CEO-Adviser model is constrained to addressing strategic
decision making. In general, the characteristics of CEO-Adviser participants (e.g., their areas
of expertise) vary from those of the broader population. For example, CEOs tend to be better
prepared to assume responsibility for complex operations than do other managers (Norburn,
1989). Thus, despite its roots in the Judge-Advisor model, we expect the uniqueness of the
decision makers, advisers, and the decisions themselves to result in a unique CEO-Adviser
model. Beyond Sniezeks (1999) work, the foundation for the CEO-Adviser model rests in
four assertions central to the management literature.
First, CEOs are ultimately responsible for their firms strategic decision making and are
accountable for its outcomes (Finkelstein & Hambrick, 1996). As the most powerful individuals in their firms, CEOs influence learning (Vera & Crossan, 2004), strategic and symbolic
activities within the firm (Hambrick & Pettigrew, 2001), member commitment to implementing strategic decisions (Goodwin, Wofford, & Whittington, 2001), and firm performance
(Waldman, Javidan, & Varella, 2004). Research has shown that in addition to CEOs having
power over strategic decision making, their leadership style (e.g., transactional vs.
transformational) significantly affects the implementation of strategic decisions and their
outcomes (e.g., Howell & Avolio, 1993).
Second, strategic decision making is characterized by ambiguity and complexity (Carpenter & Fredrickson, 2001; Finkelstein & Hambrick, 1996; Kotter, 1982). Decision makers are
compelled to use incomplete information to make key decisions that affect the firms future
and that involve substantial resources (Mintzberg, Raisinghani, & Theoret, 1976). In addition,
many firms may be described as organized anarchies (Cohen, March, & Olsen, 1972) in
which decision making is plagued by shifting preferences, unclear technology, and fluid participation. These attributes can render optimizing decision making problematic, if not impossible.
Third, there is high potential for information overload (Cyert & March, 1963; Kotter, 1982)
or overreliance on extant mental maps. The amount and type of information processed from a
firms environment (e.g., from suppliers and competitors) is likely too great for any one person, especially as information technology makes more information available more quickly.
Such information overload compels the involvement in decision making of many individuals,
each of whom processes different sources of information. If involvement were restricted to the
firms top executives, one could expect reliance on a dominant logic that may not serve the
firm well as its environment shifts (Prahalad & Bettis, 1986). At the level of strategic decisions, then, decision-making involvement comes in the form of advice and consultation between
the CEO and advisers, who may or may not be members of the TMT (Roberto, 2003) or of
the firm.

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Fourth, there is evidence that top managers rely on advice from social networks that include
friends, suppliers, customers, financial institutions, alliance partners, trade associations, and
others (Collins & Clark, 2003; Gabarro, 1987). Some research suggests that CEOs may rely
more on advice gained from personal connections than from formal advisory systems (Brown
& Eisenhardt, 1995; Elenkov, 1997; McDonald & Westphal, 2003). Moreover, Eisenhardt
(1989) has found evidence of CEOs seeking the advice of wise counselors over a range of
strategic decisions, and Roberto (2003) has reported that CEOs often rely on a core group for
making decisions. Likewise, the business press has reported instances of CEOs seeking guidance from outsiders, such as General Electric CEO Jeff Immelt soliciting advice from Warren
Buffett (Serwer, 2003). As suggested by Kets de Vries, Frank feedback from outsiders such
as external directors, bankers, and consultants can help leaders stay in touch with reality
(1989: 15). Together, these four factors provide a foundation for the CEO-Adviser model
based in the strategic management literature.

Factors Influencing the Use of the CEO-Adviser Model

In this section, we build on our four-factor foundation and develop several propositions
intended to illustrate the potential of the CEO-Adviser model. These propositions are intended
to be representative, rather than exhaustive, of how the CEO-Adviser model might contribute
to our understanding of strategic decision making. The propositions are arranged to reflect an
outside-in, macro-to-micro approach to understanding CEO-Adviser strategic decision
making. Thus, we start by considering the impact of the environment (outside) and then move
inside the firm to consider the impact of the firms strategy (macro), followed by the characteristics of the CEO and his or her selection of advisers (micro). In taking this approach, our
intent is to identify some key situational factors expected to affect the prevalence of the CEOAdviser model.

Environmental Dynamism
The external environment is an important contingency factor for strategic decision making
(e.g., Dess & Beard, 1984; Eisenhardt, 1989). CEOs need to acquire and interpret information
from their environment to make and implement strategic decisions. As environments change,
firms have to adapt to these changes. Dynamic external environments are characterized by a
high rate of change, absence of pattern, and unpredictability (Priem, Rasheed, & Kotulic,
1995). The more dynamic the environment, the greater the uncertainty and the greater the
information-processing and decision-making demands placed on a firms strategic decision
makers (Kotter, 1982).
Scanning of the external environment, however, represents only the first link in the series of
activities needed to acquire the information needed for strategic decision making in dynamic
environments (Daft et al., 1988). CEOs need to interpret the information and understand its
implications. This entails having richer and more detailed information about the changes in
the environment, their implications, and feasible alternatives (Kraatz, 1998).

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Journal of Management / October 2005

Similarly, although CEOs use both internal and external sources of information in strategic
decision making, as the dynamism of the environment increases, CEOs will tend to prefer
external sources (i.e., those comprising the informal advisory system). Obtaining data directly
from the environment ensures that it is undiluted with no loss of meaning (Daft et al., 1988).
Indeed, seeking unvarnished counsel from individuals within the formal advisory system may
be complicated by the fact that some viable, or even necessary, strategic alternatives may
require sacrifices from those individuals and their subordinates, a potential precursor to low
goal congruence (Yukl & Fu, 1999). In addition, information from within the firm tends to be
biased, distorted, and slow as it progresses up the organizational hierarchy (Daft & Lengel,
1986).
In contrast, more stable external environments create less uncertainty and thus require less
information search and less interaction with knowledgeable outsiders (Haleblian &
Finkelstein, 1993; Kotter, 1982). Information-processing requirements for decision making
are low in stable environments. Stable environments promote more internally focused behavior and increase the likelihood that competent firm insiders who comprise the formal advisory
system will have the opportunity to give advice (Yukl & Fu, 1999). With stability comes the
promise of continued individual and departmental support from the firm, so there may be less
reason for the leader to question the motives and consequent objectivity of internal
information sources. Thus,
Proposition 1: As environmental dynamism increases, CEOs will be more likely to rely on informal
advisory systems for information and advice in making strategic decisions.

Organizational Strategy
CEOs more fine-grained patterns of social information search also may be quite different
for firms pursuing different business-level strategies. Porter (1980) asserted, for example, that
firm success requires attention to distinctive competencies and that these competencies differ
for the business-level strategies of cost leadership and differentiation.
Firms pursuing cost leadership require close attention to cost controls, detailed control
reports, structured responsibilities, and incentives based on quantitative targets (Porter, 1980).
Similarly, Miles and Snows defenders engage in minimal new market or product development, want to preserve their market share, and seek stability (Miles & Snow, 1978). In essence,
firms pursuing either cost leadership or defender strategies tend to emphasize firm efficiency
(Miller, 1987). Therefore, most of the strategic decision makers attention in firms pursuing
cost leadership or defender strategies will focus on internal operations. Such efficiencyfocused strategies are most successful when implemented through mechanistic structures with
formal controls (Kotha & Orne, 1989; Priem & Rosenstein, 2000). Specifically, the formal
advisory systems within these firms are expected to obtain information from the environment
(e.g., from the political/legal sector) and to provide counsel to the CEO on strategic decisions.
Firms pursuing differentiation, in contrast, need coordination among functions, subjective
measurement and incentives, and amenities to attract highly skilled employees (Porter, 1980).
Likewise, prospectors aggressively seek new market opportunities and take risks (Miles &

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689

Snow, 1978). These firms survive by virtue of ongoing communication with the external
world. Because their competitive advantage arises largely from new products and services,
their CEOs are likely to focus on relationships with the environment, especially the customer
and technology sectors. Empirical research linking managers functional experience and business-level strategy (e.g., Govindarajan, 1989) and empirical research linking business strategy
to the areas emphasized in CEO scanning (Garg, Walters, & Priem, 2003) argue that CEOs
will seek information from individuals whose knowledge most closely reflects the sources of
core competence for their firm.
Miles and Snows prospectors and Porters differentiators emphasize innovation (Miller,
1987). Miller (1987) described these firms as complex innovators that strive to capitalize on
novel opportunities in the marketplace, supported by their use of organic structures. These
structures include informal and continuous scanning of the environment and multiplexity (i.e.,
use of diverse viewpoints in decision making). CEOs of firms emphasizing innovation use
their informal advisory network to get real-time and diverse information on the environment.
Doing so helps to minimize the potentially negative effects of, and possibly alters, the extant
dominant logic of the TMT that might otherwise hinder innovation (Prahalad & Bettis, 1986).
These arguments are consistent with contingency theory (e.g., Kotha & Orne, 1989), which
proposes higher performance for firms that align their strategy and structure. Thus,
Proposition 2a: CEOs of organizations pursuing cost leadership and defender strategies will tend to
rely more on their organizations formal advisory systems for information and advice in making
strategic decisions.
Proposition 2b: CEOs of organizations pursuing differentiation and prospector strategies will tend to
rely more on an informal advisory system for information and advice in making strategic
decisions.

CEO Leadership Style

Beyond influencing their firms through their judgment in strategic decisions (Hambrick &
Mason, 1984), CEOs also influence their firms through their ability to organize, or their charisma, or their skill in delegation (Priem, 1994: 421). Finkelstein and Hambrick (1996)
argued that leadership styles influence strategic decisions by affecting CEOs fields of vision,
perceptions, and interpretations of information. To the extent that the leadership style of CEOs
affects implementation of strategic decisions (Finkelstein & Hambrick, 1996), we would
expect strategic decision-making preference to be related to leadership style. The two main
leadership styles are transformational and transactional (Bass, 1985).
Transformational leadership creates a dynamic organizational vision that often necessitates a metamorphosis in cultural values to reflect greater innovation (Pawar & Eastman,
1997: 83). We expect transformational CEOs to rely more on their informal advisory system
for two reasons. First, the contextual factors that create the need for transformational leadership also increase the need for informal advisers. Relevant firm-based factors include the need
for adaptation, dominance of boundary-spanning units, a simple and adhocratic structure, and
clan mode of governance (Pawar & Eastman, 1997). Such firms need real-time information on

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Journal of Management / October 2005

the environment. Transformational leaders are more likely to find success in firms experiencing a need to break away from the status quo in search of a new direction (Bass, 1985), rendering obsolete many internal processes. Together, these factors will lead a CEO to rely on
informal networks outside the firm.
Second, the personality characteristics of transformational CEOs likely cause them to be
more attracted to informal advisory systems. Judge and Bono (2000) found agreeableness,
extraversion, and openness to experience to be personality traits of transformational leaders.
These leaders dominate socially through dialogue and social interaction. They are charismatic, inspirational, intellectually stimulating (Bass, 1985) and seek new opportunities
(Lowe, Kroeck, & Sivasubramaniam, 1996). They are neither rigid nor prone to use formal
structures; rather, they are unconventional innovators (Conger & Kanungo, 1988). These
characteristics will lead a CEO to rely more on informal networks outside the firm when
making strategic decisions.
Conversely, the context that accommodates transactional leadership, combined with the
personality traits of transactional leaders, make these leaders more prone to use their firms
formal advisory system. Transactional leaders are likely to emerge in firms with an emphasis
on efficiency, dominance of a technocratic core, a professional bureaucracy, and bureaucratic
modes of governance (Pawar & Eastman, 1997). Transactional leaders use contingent reward
systems within established systems to reinforce existing structures, strategies, and culture
(Waldman, Ramirez, House, & Puranam, 2001). As such, transactional leaders are more likely
to emerge in mechanistic organizations (Bass, 1985) that have a high need for efficiency and
internal information to maintain controls. Such firms use bureaucracy to substitute personal
influence with formal policies and procedures (House, Spangler, & Woycke, 1991). As a
result, CEOs will have less discretion and will rely on the firms formal advisory system. Thus,
Proposition 3a: The more transformational the CEOs leadership style, the more likely the CEO will
rely on an informal advisory system for information and advice in making strategic decisions.
Proposition 3b: The more transactional the CEOs leadership style, the more likely the CEO will rely
on a formal advisory system for information and advice in making strategic decisions.

CEO Tenure
Strategic decision making entails making consequential decisions, and taking responsibility, while relying on information and advice from others. CEOs knowledge of their informal
advisers and of the individuals within their firms formal advisory systems would seem to
influence their relative reliance on information and advice from these sources. This introduces
issues of trust and confidence in adviser expertise and knowledge (Sniezek & Van Swol,
2001). We suggest that a CEOs tenure in the position influences his or her knowledge of, and
trust in, both informal and formal advisory systems.
When CEOs are new to their positions, they may not know about or trust the knowledge,
motives, or expertise of many individuals within the firms formal advisory system. This will
be especially true for newcomers to both the firm and position. In fact, the preference of a
board for an outsider as the new CEO likely suggests to the newcomer a possible lack of confi-

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691

dence in the firms existing upper echelons. In addition, because other top executives might
feel slighted by not having been promoted to the top job, they may not be committed to the
success of the new CEO. This latter situation may occur even in the case of insider succession.
Short-tenured CEOs, therefore, need time to build understanding of their firms (Gabarro,
1987). While newcomers to both the firm and position will need time to build an understanding from the ground up, those promoted from within will need time to build an understanding of the firms altered power and information structure (Kets de Vries, 1989). As such, new
CEOs (regardless of origin) will likely rely on fewer individuals in the firms formal advisory
system when they first take charge (e.g., within the initial 6 months to about 2 years) compared to when they are more established (Eisenhardt, 1989; Gabarro, 1987; Hambrick &
Fukutomi, 1991; Kotter, 1982).
During the period in which new CEOs develop trust in their organizations formal advisory
systems, they rely more on their informal advisory system for information and expertise
(Aguilar, 1967). For short-tenured CEOs, the process of testing the formal advisory system
likely includes aggressive gathering and assessing information by asking questions on a continuous basis (Gabarro, 1987; Kotter, 1982). Building an in-group of internal advisers takes
time, as individuals are tested and found knowledgeable, credible, and loyal (Graen & UhlBien, 1995). This will be the case no matter the CEOs origin, inside or outside. In addition,
CEOs will have the opportunity over time to hire trusted and informal advisers into their new
organizationperhaps as senior executives or as members of the board. It is not surprising,
therefore, that the appointment of a new outsider CEO is usually followed shortly by the exodus and replacement of some of the incumbent top executives of the firm (Pitcher, Chreim, &
Kisfalvi, 2000).
Conversely, longer tenured CEOs have had the opportunity to evaluate and form opinions
about the trustworthiness and expertise of individuals within their firms formal advisory system. They have had the opportunity to replace those found incompetent or untrustworthy with
individuals (usually from their informal advisory system) they trust. As a result, longer tenured CEOs can be expected to rely more on the firms formal advisory system (Aguilar, 1967).
Thus,
Proposition 4: The longer a CEOs tenure in the position, the more a CEO will tend to rely on the organizations formal advisory system for information and advice in making strategic decisions.

Adviser Selection
Thus far, we have discussed several factors expected to influence a CEOs tendency toward
relying on an informal advisory system or the organizations formal advisory system. Not yet
discussed are any factors that might be expected to influence which individuals within these
systems might be relied on as advisers for strategic decision making. Although a variety of
factors might be considered, in this article, we focus on the nature of the interactions between
CEOs and their advisers. Dyadic communication provides a medium for social information
search and CEO-Adviser collaboration and interaction. Unlike the more formal and prescribed interactions between CEOs and their subordinates (including top managers), the inter-

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actions between CEOs and their advisers are often informal and based on their interpersonal
relationships. Thus, communication and collaboration between a CEO and each adviser relies
primarily on the bilateral or dyadic network ties existing between the two. The source of these
bilateral network ties is the social network of a CEO, defined as the system of relationships
with actors both inside and outside the firm who provide the CEO with information and advice
and who may be in a position to influence the CEO with respect to strategic decision making
(Collins & Clark, 2003).
The importance of dyadic interaction in the CEO-Adviser model raises questions about the
type of network ties that are optimal for strategic decision making: weak versus strong. First,
the weak-ties argument (Granovetter, 1983) suggests that distant and infrequent communication between disconnected individuals provides new and useful information and is more efficient for knowledge sharing. Furthermore, having ties with demographically heterogeneous
individuals generates a wider variety of ideas (Granovetter, 1983), thereby enhancing creative
action (Bantel & Jackson, 1989). Thus, CEOs having advisers with whom they have heterogeneous and weak ties benefit by gaining access to novel information sets, insights, and ideas
(Kraatz, 1998).
The alternative argument asserts the importance of strong ties in facilitating network communication. Strong or cohesive ties promote trust and cooperation (Coleman, 1988). Such ties
are characterized by frequent interaction, an extended history, and mutual confiding between
the focal individuals (Granovetter, 1983). Individuals belonging to a leaders in-group likely
share cohesive ties with their leader (Graen & Uhl-Bien, 1995). Tight coupling between individuals leads them to identify more with each other, enhancing collaboration and promoting
efficient knowledge sharing (Hansen, 1999). Hence, CEOs having advisers connected by
strong ties should have in-depth communication and information exchange (Kraatz, 1998).
These arguments each provide explanations for the value derived from the respective types
of network ties. For the CEO-Adviser model, we believe that CEOs are more likely to be influenced by, and to seek advice from, individuals with whom they share strong ties. First, when
making strategic decisions, CEOs need more than the novel ideas provided by those with
whom they have weak ties. Strategic decision making entails the use of detailed and rich information about alternatives, implications, desirability, and feasibility (Kraatz, 1998). The depth
of communication and level of interaction needed to provide such information and to test the
veracity and utility of such information are more likely associated with individuals with whom
the CEO has strong ties. Frequent dyadic interaction between CEOs and individuals with
whom they have strong ties facilitates the transfer and evaluation of sensitive and complex
information. Such tight coupling creates more efficient knowledge sharing (Hansen, 1999).
Second, compounding the ambiguity and complexity inherent in strategic decision making
(Carpenter & Fredrickson, 2001) is the social uncertainty present when a CEO has to rely on
information provided by another individual. Social uncertainty refers to the inability to predict
accurately another persons behavior or the underlying motivations (Sniezek & Van Swol,
2001). By definition, a CEO who needs the counsel of an adviser either does not have all the
information to make a decision or lacks the expertise to analyze adequately that information.
Thus, there is some information asymmetry between CEOs and advisers, and even with
detailed explanation, the CEO cannot eliminate all uncertainty that the adviser is giving either
accurate information or the best possible advice (Sniezek & Van Swol, 2001). Hence,

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693

Proposition 5: In choosing advisers from their social networks, CEOs are more likely to rely on individuals with whom they have strong ties rather than on individuals with whom they have weak ties
for information and advice in making strategic decisions.

Discussion
Our propositions have focused on identifying factors that contribute to relatively more or
less use by CEOs of informal versus formal advisory systems and the type of ties CEOs are
likely to have with their advisers. Yet, clearly there are many other issues raised by the CEOAdviser model that we have not discussed. These include questions of information asymmetry
between CEOs and their advisers, communication with advisers individually versus in groups,
the size of the adviser network, and how some advisers become especially relied on. Additional questions include how advisers are selected and evaluated by CEOs, how the type of
decision affects the CEOs selection of advisers, how CEOs might be led astray by advisers,
and finally, how factors such as these are related to the quality of strategic decisions. Next, we
discuss some specific directions for future research.
First, research that explicitly examines the CEO-Adviser model in combination with the
CEO model or the TMT model may lead to enhanced scholarly understanding of the processes
of strategic decision making. For example, what are the contingency factors (or the configurations of factors) that lead each modelCEO, CEO-Adviser, and TMTto yield better organizational performance? In addition, what contingencies (if any) lead to more effective implementation of strategic decisions made by the various models within the organization?
Furthermore, by formally developing a model to examine the middle ground between the
CEO and TMT models, future research can reopen questions previously explored using the
CEO or TMT models, such as the influence of CEO and TMT characteristics (e.g., tenure,
functional background) on strategic decision-making dynamics and outcomes (e.g., Michel &
Hambrick, 1992). Ultimately, such reexaminations should yield increasingly accurate
descriptions of the strategic decision-making process and outcomes in organizations. As strategic decision processes continue to be unbundled and the contents of the black box (Lawrence, 1997) are revealed, researchers will be better positioned to address questions aimed at
improving strategic decision making.
In addition, the CEO-Adviser model may facilitate finer-grained investigations into top
managers strategic decision-making processes by addressing questions such as, Who is
involved in various strategic decisions? How is their involvement determined? What are the
consequences of their participation on decision quality? By what process does a CEO select
advisers? When do advisers select CEOs? How does a CEO probe advisers and determine
the value of their inputs? How does a CEO determine whether an advisers agenda is consistent with the CEOs agenda and with desired organizational outcomes? and How does a CEO
interpret and combine advisers inputs to reach a strategic decision? The answers to these and
many other decision process questions should expand our understanding of the strategic decision-making process and enhance our ability to recommend improvements to firms existing
decision processes. Questions such as these have clear normative implications for practitioners wanting to choose the most advantageous decision-making approach given different task
and environmental conditions.

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There is also potential for integrating and extending currently disparate areas of research
under the CEO-Adviser model. Mintzberg (1973) has noted, for example, that CEOs prefer
face-to-face contact when they gather information. This likely applies also to their use of different communication methods with different advisers in the CEO-Adviser model. This provides an opportunity to extend strategic decision-making research to include information
gathering such as CEO scanning. For example, what types of advisers are likely to be chosen
and relied on for information and advice in which environmental sectors, given different levels
of uncertainty and the severe limitations on a CEOs time (e.g., Daft et al., 1988)?
Finally, further extensions of the CEO-Adviser model may be possible with additional
insights from other theories. Leader-Member Exchange (LMX) theory (Graen & Uhl-Bien,
1995), for example, could help us to understand the dyadic relationships between the CEO and
each adviser, plus how these relationships might affect the relationships among all of the
firms senior executives. Similarly, the extensive research on feedback-seeking behavior
could provide guidance for building further understanding of when, and from whom, CEOs
solicit advice. Ashford, Blatt, and VandeWalle noted that little attention has been given to the
feedback-seeking dynamics of those at the top of an organization or unit (2003: 788). They
argued that those occupying the highest levels in a hierarchy likely receive less spontaneous
feedback from others and, thus, have a greater instrumental need to seek feedback proactively.
Moreover, high contextual uncertaintyalmost universal for CEOsalso increases the
instrumental motive for feedback seeking (Ashford & Cummings, 1985; Gupta,
Govindarajan, & Malhotra, 1999). Thus, proactive feedback seeking from trusted advisers
could help CEOs validate their organizational vision and strategic goals (Ashford et al., 2003).
In sum, the CEO-Adviser model offers a framework for examining not only the goal-oriented
feedback-seeking behaviors of CEOs but also their decision-related information gathering
and exchange efforts.
Although the CEO-Adviser model could enhance our understanding of strategic decision
making, it still falls prey to the problems that have plagued researchers wishing to test empirically theories pertaining to top executives. Limited access to CEOs and other top executives,
for example, has restricted researchers ability to investigate top management issues. This
problem is accentuated for the CEO-Adviser model, which focuses on the process of executive decision making. This process cannot be observed easily outside the executive suite. In
fact, many of the concepts central to the CEO-Adviser modelsuch as the choice of advisers
and CEO interaction with these adviserscan only be investigated with the active participation of the CEO and his or her advisers. This is unlike the CEO and TMT models, in which
some of the proposed relationships can be tested using demographic proxies.
This does not imply, however, that the CEO-Adviser model cannot be empirically tested.
Intensive qualitative research, such as the case-based method proposed by Eisenhardt (1989),
may be used to develop further the CEO-Adviser model. Researchers can focus on a single or
small sample of firms and intensively and actively observe the decision-making process. From
this initial set of intensive studies, constructs and hypotheses may be developed that can then
be empirically tested on larger samples. Initial case-based studies will be able to operationalize
some of the key concepts of the CEO-Adviser model such that it may be measured with more
readily available data.

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Beyond prying open the black box (Lawrence, 1997) of strategic decision making as it
occurs in most firms, the CEO-Adviser model also has some practical implications. It highlights the fact that not all models are equally applicable to all firms and that the decision-making
process differs across firms. The CEO model, for example, might most appropriately be
adopted by researchers when the firms to be studied are (a) relatively small in terms of either
size or product/market scope, wherein even strategic decisions might be made based on one
persons perspective, and/or (b) relatively young, wherein an entrepreneurial CEO or ownermanager has yet to establish either a formal advisory system or an external network of trusted
associates (Greiner, 1998; Nelson & Winter, 1982). Furthermore, to the extent that a relatively
large power differential exists between the CEO and other managers (Finkelstein, 1992) in
such relatively small and immature organizations, we expect the CEO model to be particularly
informative.
The TMT model, on the other hand, might most appropriately be adopted by researchers
when the firms to be studied are (a) relatively large in terms of size and product/market scope,
wherein structural complexity compels decision making that depends on the diverse perspectives of multiple organizational members, and/or (b) relatively mature, where decentralized
operations reflect on the overall organizations reputation (Greiner, 1998). To the extent that a
relatively small power differential exists between a CEO and the coalition of top managers
representing the range of managerial orientations (Finkelstein, 1992: 505) in such relatively
large and mature organizations, we expect the TMT model to be particularly informative.
Anecdotal evidence and scholarly reports, however, indicate that another decision-making
model, which we have labeled CEO-Adviser decision making, is widespread at strategic levels in firms. Thus, the CEO-Adviser model is descriptively accurate in manyalthough not
allstrategic decision situations. The CEO-Adviser model might most appropriately be
adopted by researchers when the firms to be studied are (a) not so small that their strategic
direction and operations can be established solely by an owner-manager and yet not so large
that those reporting to the CEO see themselves as leading their own independent companies
within the firm, (b) producing multiple products or services in multiple geographic markets,
and (c) mature enough to have survived and expanded beyond the initial birth or entrepreneurial stage of their development (Greiner, 1998). To the extent that a moderate power differential
exists between the CEO and the firms top managers in these hybrid firms, where the overarching organizational goalgrowthdepends on accurately listening to internal and external
stakeholders, we expect the CEO-Adviser model to be particularly informative (Greiner,
1998).
The CEO and TMT models will continue to generate productive research on strategic decision making. We hope that the CEO-Adviser model will augment and complement these foundations. We have described CEO-Adviser decision making as a constructive addition to strategic decision-making research. Our proposed research agenda considers the context of adviser
selection and the advising process. Again, the propositions we offer are far from exhaustive,
and important theory may be built in other areas using the CEO-Adviser model. Moreover, we
have suggested areas where other literatures could be integrated into and extend the CEOAdviser model. We hope that this article stimulates scholarly activity that further articulates
and tests our propositions, and develops new ones, under the CEO-Adviser model.

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Journal of Management / October 2005

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Biographical Notes
Lucy A. Arendt is a lecturer of management in the Professional Programs of Business at the University of Wisconsin
Green Bay. She is a doctoral candidate in organizations and strategic management at the University of Wisconsin
Milwaukee. Her research interests include top management sense making and judgment, and the effects of leader
behaviors on follower efficacy and creative performance.
Richard L. Priem is the Robert L. and Sally S. Manegold Professor of Management and Strategic Planning at the University of WisconsinMilwaukee. He earned his Ph.D. in strategic management at the University of Texas at
Arlington. He was a Fulbright scholar at the University College of Belize and has visited at the Hong Kong Polytechnic
University, Hong Kong University of Science and Technology, and Groupe ESCEM in Tours, France. His research
interests include top management decision making and processes.
Hermann Achidi Ndofor is an assistant professor of management at the University of North Carolina at Charlotte. He
received his Ph.D. from the University of WisconsinMilwaukee School of Business. His research interests focus on
how firms use resources to gain competitive advantage, competitive dynamics, and entrepreneurship.