The Criticality of C-Suite Team Intelligence (TQ) in Economic Value Creation

Abstract

Eighty-five percent (85%) of board directors reported they are generally dissatisfied with their top management team’s ability to generate results. This reflects the generally-held belief that the top management team (TMT) has a significant impact on firm results, however, a direct correlation between TMT effectiveness based demographic elements including compositional diversity, education, experience, colocation, and team size, to financial outcomes, in past research, has been inconclusive. This study examines the relationship between Top Management Team (TMT) behavioral characteristics – namely Team Intelligence (TQ) – and corporate profitability. Using team as the unit of analysis, our study explains the critical impact of TQ on corporate financial performance. Employing a survey comprised of a new comprehensive measure of team dynamic, as well as existing measures for collective team outcomes, we collected data from 123 upper echelon executives of public companies. Our objective was to understand how TQ impacts the ability of TMTs to leverage the knowledge and experience of the team to generate measurable economic value. This quantitative study reveals a strong and significant predictive relationship between TMTs and economic value creation, isolating a key driver of a firm’s relative profitability performance, and predicting if the organization out- or underperforms their competitors. The implication of this study is that a reliable and valid method to assess the TQ of the TMT now exists and allows us to understand the current contribution to and future potential for economic value creation from corporate executives.